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As filed with the Securities and Exchange Commission on June 20, 1996
1940 Act File No. 811-07567
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
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NAVIGATOR SECURITIES LENDING TRUST
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(Exact Name of Registrant as Specified in Charter)
Two International Place, 31st Floor, Boston, Massachusetts 02110
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (617) 664-2500
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PHILIP H. NEWMAN, ASSISTANT SECRETARY
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
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(Name and Address of Agent for Service)
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Copy to:
M. BRADLEY JACOBS
STATE STREET BANK AND TRUST COMPANY
TWO INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
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NAVIGATOR SECURITIES LENDING TRUST
Contents of Registration Statement
This Registration Statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
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<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
(REGISTRATION STATEMENT ON FORM N-1A)
Form N-1A Item No.
------------------ Prospectus
Part A Heading
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<S> <C> <C>
1. Cover Page........................................... *
2. Synopsis............................................. *
3. Condensed Financial Information...................... *
4. General Description of Registrant.................... General Description of Registrant
5. Management of the Trust.............................. Management of the Trust
5A. Management's Discussion of Fund Performance *
6. Capital Stock and Other Securities................... Capital Stock and Other Securities
7. Purchase of Securities Being Offered................. Purchase of Securities Being Offered
8. Redemption or Repurchase............................. Redemption or Repurchase
9. Pending Legal Proceedings............................ Not Applicable
SAI
Part B Heading
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10. Cover Page........................................... Cover Page
11. Table of Contents.................................... Table of Contents
12. General Information and History...................... General Information and History
13. Investment Objectives and Policies................... Investment Objectives and Policies
14. Management of the Registrant......................... Management of the Registrant
15. Control Persons and Principal Holders of Securities.. Control Persons and Principal Holders
of Securities
<FN>
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* Pursuant to General Instruction F4 of Form N-1A, a registration statement
filed under only the Investment Company Act of 1940 shall consist of the
facing sheet of the Form, responses to all items of Parts A and B except
Items 1, 2, 3 and 5A of Part A thereof, responses to all items of Part C
except Items 24(b)(6), 24(b)(10), 24(b)(11), 24(b)(12) and 24(b)(16)
required signatures, and all other documents that are required or which the
Registrant may file as part of the registration statement.
</TABLE>
(i)
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<TABLE>
<CAPTION>
SAI
Part B (cont.) Heading
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<S> <C> <C>
16. Investment Advisory and Other Services............. Investment Advisory and Other
Services
17. Brokerage Allocation and Other Practices........... Brokerage Allocation and Other
Practices
18. Capital Stock and Other Securities................. Capital Stock and Other Securities
19. Purchase, Redemption and Pricing
of Securities Being Offered...................... Purchase, Redemption and Pricing of
Securities Being Offered
20. Tax Status......................................... Tax Status
21. Underwriters....................................... Not Applicable
22. Calculation of Performance Data.................... Calculation of Performance Data
23. Financial Statements............................... Not Applicable
</TABLE>
(ii)
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PART A
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ITEM 1. COVER PAGE
Not Applicable.
ITEM 2. SYNOPSIS
Not Applicable.
ITEM 3. CONDENSED FINANCIAL INFORMATION
Not Applicable.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
State Street Bank and Trust Company ("State Street") has established a
securities lending program for its clients. Each client that participates in the
securities lending program as a lender (each, a "Lender" and collectively, the
"Lenders") enters into a securities lending authorization agreement with State
Street. Under such agreement, State Street is authorized to invest the cash
collateral securing loans of securities of each Lender in a variety of
investments. Navigator Securities Lending Trust (the "Trust") has been
established primarily for the investment and reinvestment of cash collateral on
behalf of Lenders participating in State Street's securities lending program.
The Trust is an open-end management investment company registered with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended (the "1940 Act"). It is an association with transferable shares
organized pursuant to a Master Trust Agreement, dated June 15, 1995 (the
"Declaration of Trust"), under the laws of the Commonwealth of Massachusetts
(commonly referred to as a Massachusetts business trust). The Trust has
established three series of shares of beneficial interest representing interests
in three separate portfolios: Navigator Government Portfolio, Navigator Prime
Portfolio and Navigator Short-Term Bond Portfolio (each, a "Portfolio" and
collectively, the "Portfolios"). Navigator Government Portfolio and Navigator
Short-Term Bond Portfolio, however, are not yet operational. Each Portfolio is
diversified within the meaning of the 1940 Act.
Shares of Navigator Prime Portfolio are being offered to the Lenders in
connection with State Street's securities lending program. Shares of that
Portfolio are sold on a private placement basis in accordance with Regulation D
under the Securities Act of 1933, as amended (the "1933 Act"). Shares of the
Trust are sold directly by the Trust without a distributor and are not subject
to a sales load or redemption fee; assets of the Trust are not subject to a Rule
12b-1 fee.
THE PORTFOLIOS
Set forth below is a summary of the investment objectives and policies of
each Portfolio. The investment objectives of each Portfolio may be changed at
any time by the Board of Trustees of the Trust (the "Board of Trustees" or the
"Trustees") upon at least 30 days' prior written notice to shareholders of the
Portfolio. See the Statement of Additional Information for a description of each
Portfolio's investment restrictions.
NAVIGATOR GOVERNMENT PORTFOLIO. Navigator Government Portfolio will seek to
(i) maximize current income to the extent consistent with the preservation of
capital and liquidity and (ii) maintain a stable $1.00 per share net asset value
by investing in dollar denominated securities with remaining maturities of one
year or less. This Portfolio will invest exclusively in securities issued or
backed by the U.S. Government or its agencies or instrumentalities ("U.S.
Government Securities") and in repurchase agreements collateralized with U.S.
Government Securities. All investments will qualify as "eligible securities"
within the meaning of Rule 2a-7 under the 1940 Act. Navigator Government
Portfolio will seek to maintain a stable net asset value per share
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of $1.00 by valuing its portfolio using the amortized cost method and will
comply with the requirements of Rule 2a-7 under the 1940 Act.
NAVIGATOR PRIME PORTFOLIO. Navigator Prime Portfolio will seek to (i)
maximize current income to the extent consistent with the preservation of
capital and liquidity and (ii) maintain a stable $1.00 per share net asset value
by investing in dollar denominated securities with remaining maturities of one
year or less. This Portfolio will invest in a variety of high quality U.S.
dollar-denominated instruments, including (a) U.S. Government Securities; (b)
instruments of U.S. and foreign banks, including certificates of deposit,
banker's acceptances and time deposits (including Eurodollar certificates of
deposit, Eurodollar time deposits and Yankee certificates of deposit); (c)
corporate debt obligations, including commercial paper of U.S. and foreign
companies; (d) variable amount master demand notes; (e) debt obligations of
foreign governments and foreign government subdivisions and their agencies and
instrumentalities and supranational organizations; (f) repurchase agreements;
(g) mortgage-backed securities; (h) asset-backed securities; (i) floating-rate
notes, medium term notes and master term notes; and (j) shares of other money
market funds and similar commingled investment funds. All investments will
qualify as "eligible securities" within the meaning of Rule 2a-7 under the 1940
Act. Navigator Prime Portfolio will seek to maintain a stable net asset value
per share of $1.00 by valuing its portfolio using the amortized cost method and
will comply with the requirements of Rule 2a-7 under the 1940 Act.
NAVIGATOR SHORT-TERM BOND PORTFOLIO. Navigator Short-Term Bond Portfolio
will seek to maximize current income to the extent consistent with the
preservation of capital and liquidity. Navigator Short-Term Bond Portfolio,
however, will not seek to maintain a stable net asset value per share.
Accordingly, the investment return and principal value of an investment in
Navigator Short-Term Bond Portfolio will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost. This
Portfolio will invest in the same U.S. dollar-denominated instruments in which
Navigator Prime Portfolio invests. In addition, Navigator Short-Term Bond
Portfolio may invest in mortgage-backed and asset-backed securities and other
U.S. dollar-denominated corporate, governmental and supranational debt
obligations with maturities in excess of 13 months, subject to certain quality
and duration requirements established for the Portfolio. Navigator Short-Term
Bond Portfolio may invest in forward contracts, futures, options and swap
agreements for the purpose of modifying the average effective duration of the
portfolio and creating synthetic floating-rate securities. At the time of
purchase, the maximum effective duration of any security will not exceed five
years. The average effective duration of Navigator Short-Term Bond Portfolio,
after giving effect to all duration shortening positions, will be managed to be
between one and 120 days. At the time of purchase, (i) all securities with
remaining maturities of 13 months or less will qualify as "first tier
securities" within the meaning of Rule 2a-7(a)(6) under the 1940 Act; and (ii)
all securities with remaining maturities in excess of 13 months will (x) be
rated "A" or better by at least two nationally recognized statistical rating
organizations (each, an "NRSRO"), or (y) if rated by only one NRSRO, be rated
"A" or better by such NRSRO, or (z) if unrated, be determined by State Street to
be of comparable quality. The Portfolio will not acquire any security (other
than a U.S. Government Security) if, as a result thereof, such security would
represent more than five percent of the Portfolio's assets.
Navigator Short-Term Bond Portfolio will not seek to maintain a stable net
asset value per share by means of the amortized cost method. By means of
managing the average effective duration of Navigator Short-Term Bond Portfolio,
however, State Street will seek to minimize fluctuations in the value of the
Portfolio. Securities with maturities of 60 days or less will be valued based
upon the amortized cost method. The value of all other securities will be
determined based upon market value or, in the absence of market value, at fair
value as determined by the Board of Trustees of the Trust.
INVESTMENT POLICIES
The investment policies described below reflect the current practices of
each Portfolio, are not fundamental, and may be changed by the Board of Trustees
of the Trust without shareholder approval. To the extent consistent with each
Portfolio's investment objective and other stated policies and restrictions, and
unless
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otherwise indicated, each Portfolio may invest in the following instruments and
may use the following investment techniques:
U.S. GOVERNMENT SECURITIES. The types of U.S. Government securities in
which the Portfolios may at times invest include obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are supported
by any of the following: (i) the full faith and credit of the U.S. Treasury,
(ii) the right of the issuer to borrow an amount limited to a specific line of
credit from the U.S. Treasury, (iii) discretionary authority of the U.S.
Government agency or instrumentality or (iv) the credit of the instrumentality
(examples of agencies and instrumentalities are: Federal Land Banks, Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit Banks,
Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction and
Development and Federal National Mortgage Association). No assurance can be
given that in the future the U.S. Government will provide financial support to
such U.S. Government agencies or instrumentalities described in (ii), (iii) and
(iv), other than as set forth above, since it is not obligated to do so by law.
REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase agreements,
whereby the Portfolio purchases securities from a financial institution that
agrees to repurchase the securities within a specified time (normally one day)
at the Portfolio's cost plus interest. A Portfolio will enter into repurchase
agreements only with financial institutions that State Street determines are
creditworthy in accordance with guidelines established by the Board of Trustees.
No Portfolio will invest more that 10% of its net assets (taken at current
market value) in repurchase agreements maturing in more than seven days. Should
the counterparty to a repurchase agreement transaction fail financially, the
Portfolio may experience delays in realizing on the collateral securing the
counterparty's obligations or a loss of rights in such collateral. Further, any
amounts realized upon the sale of collateral may be less than that necessary to
compensate the Portfolio fully. The Portfolio must take possession of collateral
either directly or through a third-party custodian. All repurchase transactions
must be collateralized initially at a minimum of 102% and counterparties are
required to deliver additional collateral in the event the market value of the
collateral falls below 100%.
STRIPPED SECURITIES. Each Portfolio may invest in stripped securities,
which are U.S. Treasury bonds and notes, the unmatured interest coupons of which
have been separated from the underlying obligation. Stripped securities are zero
coupon obligations that are normally issued at a discount from their face value.
A Portfolio may invest no more than 25% of its assets in stripped securities
that have been stripped by their holder, typically a custodian bank or
investment brokerage firm. A number of securities firms and banks have stripped
the interest coupons and resold them in custodian receipt programs with
different names such as Treasury Income Growth Receipts ("TIGRS") and
Certificates of Accrual on Treasuries ("CATS"). The Trust intends to rely on the
opinions of counsel to the sellers of these certificates or other evidences of
ownership of U.S. Treasury obligations that, for Federal tax and securities
purposes, purchasers of such certificates most likely will be deemed the
beneficial holders of the underlying U.S. Government securities.
Privately-issued stripped securities such as TIGRS and CATS are not themselves
guaranteed by the U.S. Government, but the future payment of principal or
interest on U.S. Treasury obligations which they represent is so guaranteed.
ELIGIBLE DERIVATIVE INSTRUMENTS (NAVIGATOR SHORT-TERM BOND PORTFOLIO ONLY).
Navigator Short-Term Bond Portfolio may invest in forwards, futures, options and
swap agreements within the following parameters. Derivative instruments may be
used to create synthetic fixed income securities and to modify portfolio average
duration. Derivative positions within the Portfolio will be managed so that the
average effective duration remains below the 120 day upper limit specified for
the Portfolio. The total absolute value of the option adjusted duration dollars
of the derivative positions shall be less than or equal to 10% of the option
adjusted duration dollars of the underlying investment positions.
VARIABLE AND FLOATING RATE INSTRUMENTS. A floating rate security provides
for the automatic adjustment of its interest rate whenever a specified interest
rate changes. A variable rate security provides for the automatic
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establishment of a new interest rate on set dates. Interest rates on these
securities are ordinarily tied to, and represent a percentage of, a widely
recognized interest rate, such as the yield on 90-day U.S. Treasury bills or the
prime rate of a specified bank. These rates may change as often as twice daily.
Generally, changes in interest rates will have a smaller effect on the market
value of variable and floating rate securities than on the market value of
comparable fixed income obligations. Thus, investing in variable and floating
rate securities generally affords less opportunity for capital appreciation and
depreciation than investing in comparable fixed income securities. Navigator
Prime Portfolio may purchase variable and floating rate non-U.S. Government
securities that have a stated maturity in excess of 13 months only if the
Portfolio has a right to demand payment of the principal of the instrument at
least once every thirteen months upon not more that 30 days' notice.
Variable and floating rate instruments may include variable amount master
demand notes that permit the indebtedness thereunder to vary in addition to
providing for periodic adjustments in the interest rate. There may be no active
secondary market with respect to a particular variable or floating rate
instrument. Nevertheless, the periodic readjustments of their interest rates
tend to assure that their value to a Portfolio will approximate their par value.
Illiquid variable and floating rate instruments (instruments that are not
payable upon seven days' notice and do not have an active trading market) that
are acquired by a Portfolio are subject to a Portfolio's percentage limitations
regarding securities that are illiquid or not readily marketable. State Street
will continuously monitor the creditworthiness of issuers of variable and
floating rate instruments in which the Trust invests and their ability to repay
principal and interest.
AFFILIATED BANK TRANSACTIONS. Pursuant to exemptive orders issued by the
Securities and Exchange Commission (the "SEC"), the Portfolios may engage in
certain transactions with banks that are, or may be considered to be, affiliated
persons of the Portfolios under the 1940 Act. Such transactions may be entered
into only pursuant to procedures established, and periodically reviewed by, the
Board of Trustees. These transactions may include purchases, as principal, of
short-term obligations of, and repurchase agreements with, the 50 largest U.S.
banks (measured by deposits); transactions in municipal securities; and
transactions in U.S. Government securities with affiliated banks that are
primary dealers in these securities.
WHEN-ISSUED TRANSACTIONS. New issues of securities are often offered on a
when-issued basis. This means that delivery and payment for the securities
normally will take place several days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a when-issued basis are each fixed at the
time the buyer enters into the commitment.
Each Portfolio will make commitments to purchase when-issued securities
only with the intention of actually acquiring the securities, but a Portfolio
may sell these securities or dispose of the commitment before the settlement
date if it is deemed advisable as a matter of investment strategy. Cash or
marketable high quality debt securities equal to the amount of the above
commitments will be segregated on each Portfolio's records. For the purpose of
determining the adequacy of these securities, the segregated securities will be
valued at market. If the market value of such securities declines, additional
cash or securities will be segregated on the Portfolio's records on a daily
basis so that the market value of the account will equal the amount of such
commitments by the Portfolio. No Portfolio will invest more than 25% of its net
assets in when-issued securities.
Securities purchased on a when-issued basis and the securities held by each
Portfolio are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value of
such securities will fluctuate inversely to changes in interest rates (i.e.,
they will appreciate in value when interest rates decline and decrease in value
when interest rates rise). Therefore, if in order to achieve higher interest
income a Portfolio remains substantially fully invested at the same time that it
has purchased securities on a "when-issued" basis, there will be a greater
possibility of fluctuation in the Portfolio's net asset value.
When payment for when-issued securities is due, each Portfolio will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities or, and although it would
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not normally be expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Portfolio's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
FORWARD COMMITMENTS (NAVIGATOR PRIME PORTFOLIO AND NAVIGATOR SHORT-TERM
BOND PORTFOLIO ONLY). Each of Navigator Prime Portfolio and Navigator Short-Term
Bond Portfolio may contract to purchase securities for a fixed price at a future
date beyond the customary settlement time, provided that the forward commitment
is consistent with the Portfolio's ability to manage its investment portfolio,
maintain a stable net asset value and honor redemption requests. When effecting
such transactions, cash or liquid high quality debt obligations held by the
Portfolio of a dollar amount sufficient to make payment for the portfolio
securities to be purchased will be segregated on the Portfolio's records at the
trade date and maintained until the transaction is settled. The failure of the
other party to the transaction to complete the transaction may cause the
Portfolio to miss an advantageous price or yield. The Portfolio bears the risk
of price fluctuations during the period between the trade and settlement dates.
SECTION 4(2) COMMERCIAL PAPER (NAVIGATOR PRIME PORTFOLIO AND NAVIGATOR
SHORT-TERM BOND PORTFOLIO ONLY). Navigator Prime Portfolio and Navigator
Short-Term Bond Portfolio may invest in commercial paper issued in reliance on
the so-called private placement exemption from registration afforded by Section
4(2) of the 1933 Act ("Section 4(2) paper"). Section 4(2) paper is restricted as
to disposition under the federal securities laws and generally is sold to
institutional investors, such as Navigator Prime Portfolio and Navigator
Short-Term Bond Portfolio, that agree they are purchasing the paper for
investment and not with a view to distribution. Any resale by the purchaser must
be in an exempt transaction. Section 4(2) paper normally is resold to other
institutional investors through or with the assistance of the issuer or
investment dealers that make a market in Section 4(2) paper. Section 4(2) paper
will not be subject to a Portfolio's 10% limitation on illiquid securities, set
forth below, where State Street (pursuant to guidelines established by the Board
of Trustees) determines that a liquid trading market exists for the securities.
ILLIQUID SECURITIES. A Portfolio will not invest more than 10% of its net
assets in illiquid securities or securities that are not readily marketable,
including repurchase agreements and time deposits of more that seven days'
duration. The absence of a regular trading market for securities imposes
additional risks on investments in these securities. Illiquid securities may be
difficult to value and may often be disposed of only after considerable expense
and delay.
VARIABLE AMOUNT MASTER DEMAND NOTES (NAVIGATOR PRIME PORTFOLIO AND
NAVIGATOR SHORT-TERM BOND PORTFOLIO ONLY). Navigator Prime Portfolio and
Navigator Short-Term Bond Portfolio may invest in variable amount master demand
notes, which are unsecured obligations that are redeemable upon demand and are
typically unrated. These instruments are issued pursuant to written agreements
between their issuers and holders. The agreements permit the holders to increase
(subject to an agreed maximum) and the holders and issuers to decrease the
principal amount of the notes, and specify that the rate of interest payable on
the principal fluctuates according to an agreed formula.
MORTGAGE-RELATED PASS-THROUGH SECURITIES (NAVIGATOR PRIME PORTFOLIO AND
NAVIGATOR SHORT-TERM BOND PORTFOLIO ONLY). Navigator Prime Portfolio and
Navigator Short-Term Bond Portfolio may invest in mortgage-related securities.
Mortgage pass-through certificates are issued by governmental,
government-related and private organizations and are backed by pools of mortgage
loans. These mortgage loans are made by savings and loan associations, mortgage
bankers, commercial banks and other lenders to residential home buyers
throughout the United States. The securities are "pass-through" securities
because they provide investors with monthly payments of principal and interest
that, in effect, are a "pass-through" of the monthly payments made by the
individual borrowers on the underlying mortgage loans, net of any fees paid to
the issuer or guarantor of the pass-through certificates. The principal
governmental issuer of such securities is the Government National Mortgage
Association ("GNMA"), which is a wholly-owned U.S. Government corporation within
the Department of Housing and Urban Development. Government-related issuers
include the Federal Home Loan
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Mortgage Corporation ("FHLMC"), a corporate instrumentality of the United States
created pursuant to an act of Congress, which is owned entirely by the Federal
Home Loan Bank, and the Federal National Mortgage Association ("FNMA"), a
government sponsored corporation owned entirely by private stockholders.
Commercial banks, savings and loan associations, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may
be the originators of the underlying mortgage loans as well as the guarantors of
the mortgage-related securities.
a. GNMA MORTGAGE PASS-THROUGH CERTIFICATES ("GINNIE MAES"). Ginnie
Maes represent an undivided interest in a pool of mortgage loans that
are insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Ginnie
Maes entitle the holder to receive all payments (including
prepayments) of principal and interest owed by the individual
mortgagors, net of fees paid to GNMA and to the issuer which assembles
the loan pool and passes through the monthly mortgage payments to the
certificate holders (typically, a mortgage banking firm), regardless
of whether the individual mortgagor actually makes the payment.
Because payments are made to certificate holders regardless of whether
payments are actually received on the underlying loan, Ginnie Maes are
of the "modified pass-through" mortgage certificate type. GNMA is
authorized to guarantee the timely payment of principal and interest
on the Ginnie Maes as securities backed by an eligible pool of
mortgage loans. The GNMA guaranty is backed by the full faith and
credit of the United States, and GNMA has unlimited authority to
borrow funds from the U.S. Treasury to make payments under the
guaranty. The market for Ginnie Maes is highly liquid because of the
size of the market and the active participation in the secondary
market by securities dealers and a variety of investors.
b. FHLMC MORTGAGE PARTICIPATION CERTIFICATES ("FREDDIE MACS"). Freddie
Macs represent interests in groups of specified first lien residential
conventional mortgage loans underwritten and owned by FHLMC. Freddie
Macs entitle the holder to timely payment of interest, which is
guaranteed by FHLMC. FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage
loans. In cases where FHLMC has not guaranteed timely payment of
principal, FHLMC may remit the amount due on account of its guarantee
of ultimate payment of principal at any time after default on an
underlying loan, but in no event later than one year after it becomes
payable. Freddie Macs are not guaranteed by the United States or by
any of the Federal Home Loan Banks and do not constitute a debt or
obligation of the United States or of any Federal Home Loan Bank. The
secondary market for Freddie Macs is highly liquid because of the size
of the market and the active participation in the secondary market by
FHLMC, securities dealers and a variety of investors.
c. FNMA GUARANTEED MORTGAGE PASS-THROUGH CERTIFICATES ("FANNIE MAES").
Fannie Maes represent an undivided interest in a pool of conventional
mortgage loans secured by first mortgages or deeds of trust, on
one-family to four-family residential properties. FNMA is obligated to
distribute scheduled monthly installments of principal and interest on
the loans in the pool, whether or not received, plus full principal of
any foreclosed or otherwise liquidated loans. The obligation of FNMA
under its guaranty is solely the obligation of FNMA and is not backed
by, nor entitled to, the full faith and credit of the United States.
The market value of mortgage-related securities depends on, among other
things, the level of interest rates, the certificates' coupon rates and the
payment history of the underlying borrowers.
Although the mortgage loans in a pool underlying a mortgage pass-through
certificate will have maturities of up to 30 years, the average life of a
mortgage pass-through certificate will be substantially less because the loans
will be subject to normal principal amortization and also may be prepaid prior
to maturity.
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Prepayment rates vary widely and may be affected by changes in mortgage interest
rates. In periods of falling interest rates, the rate of prepayment on higher
interest mortgage rates tends to increase, thereby shortening the actual average
life of the mortgage pass-through certificate. Conversely, when interest rates
are rising, the rate of prepayment tends to decrease, thereby lengthening the
average life of the mortgage pass-through certificate. Accordingly, it is not
possible to predict accurately the average life of a particular pool. However,
based on current statistics, it is conventional to quote yields on mortgage
pass-through certificates based on the assumption that they have effective
maturities of 12 years. Reinvestment of prepayments may occur at higher or lower
rates than the original yield on the certificates. Due to the prepayment feature
and the need to reinvest prepayments of principal at current rates, mortgage
pass-through certificates with underlying loans bearing interest rates in excess
of the market rate can be less effective than typical noncallable bonds with
similar maturities at "locking in" yields during periods of declining interest
rates, although they may have comparable risks of declining in value during
periods of rising interest rates.
ZERO COUPON SECURITIES. These securities are notes, bonds and debentures
that: (i) do not pay current interest and are issued at a substantial discount
from par value; (ii) have been stripped of their unmatured interest coupons and
receipts; or (iii) pay no interest until a stated date one or more years into
the future. These securities also include certificates representing interests in
such stripped coupons and receipts.
Because the Portfolios accrue taxable income from zero coupon securities
without receiving regular interest payments in cash, each Portfolio may be
required to sell portfolio securities in order to pay a dividend depending,
among other things, upon the number of shareholders who elect to receive
dividends in cash rather than reinvesting dividends in additional shares of the
Portfolio. Investing in these securities might also force the Portfolio to sell
portfolio securities to maintain portfolio liquidity.
Because a zero coupon security pays no interest to its holder during its
life or for a substantial period of time, it usually trades at a deep discount
from its face or par value and will be subject to greater fluctuations in market
value in response to changing interest rates than debt obligations of comparable
maturities that make regular distributions of interest.
EURODOLLAR CERTIFICATES OF DEPOSIT (ECDS), EURODOLLAR TIME DEPOSITS (ETDS)
AND YANKEE CERTIFICATES OF DEPOSIT (YCDS) (NAVIGATOR PRIME PORTFOLIO AND
NAVIGATOR SHORT-TERM BOND PORTFOLIO ONLY). ECDs are U.S. dollar-denominated
certificates of deposit issued by foreign branches of domestic banks. ETDs are
U.S. dollar denominated time deposits in foreign branches of U.S. banks and
foreign banks. YCDs are U.S. dollar denominated certificates of deposit issued
by U.S. branches of foreign banks. Different risks than those associated with
the obligations of domestic banks may exist for ECDs, ETDs and YCDs because the
banks issuing these instruments, or their domestic or foreign branches, are not
necessarily subject to the same regulatory requirements that apply to domestic
banks, such as loan limitations, examinations and reserve, accounting, auditing,
recordkeeping and public reporting requirements.
RATINGS OF DEBT INSTRUMENTS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") -- LONG TERM DEBT RATINGS. The
following is a description of Moody's debt instrument ratings.
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
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<PAGE> 13
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a midrange ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
STANDARD & POOR'S CORPORATION ("S&P"). The ratings are based, in varying
degrees, on the following considerations: (i) the likelihood of default --
capacity and willingness of the obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of the obligation; (ii) the
nature of and provisions of the obligation; and (iii) the protection afforded
by, and relative position of, the obligation in the event of bankruptcy,
reorganization, or other arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.
AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
RATINGS OF COMMERCIAL PAPER
MOODY'S. Moody's short-term debt ratings are opinions of the ability of
issuers to repay punctually senior debt obligations. These obligations have an
original maturity not exceeding one year, unless explicitly noted. Moody's
employs the following three designations, all judged to be investment grade, to
indicate the relative repayment ability of rated issuers:
o Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced by
many of the following characteristics:
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<PAGE> 14
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
o Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound,
may be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions.
Ample alternative liquidity is maintained.
o Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.
o Issuers rated Not Prime do not fall within any of the Prime rating
categories.
S&P. An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. Ratings are graded into several categories, ranging from A-1 for the
highest quality obligations to D for the lowest. These categories are as
follows:
A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are deemed with a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
FITCH'S INVESTORS SERVICE, INC. ("FITCH"). Commercial paper rated by Fitch
reflects Fitch's current appraisal of the degree of assurance of timely payment
of such debt. An appraisal results in the rating of an issuer's paper as F-1,
F-2, F-3, or F-4.
F-1 -- This designation indicates that the commercial paper is regarded as
having the strongest degree of assurance for timely payment.
F-2 -- Commercial paper issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than those issues rated F-1.
DUFF AND PHELPS, INC. Duff & Phelps' short-term ratings are consistent with
the rating criteria utilized by money market participants. The ratings apply to
all obligations with maturities of under one year, including commercial paper,
the uninsured portion of certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of credit, and current
maturities of long-term debt. Asset-backed commercial paper is also rated
according to this scale.
A-9
<PAGE> 15
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps' short-term ratings is the
refinement of the traditional '1' category. The majority of short-term debt
issuers carry the highest rating, yet quality differences exist within that
tier. As a consequence, Duff & Phelps has incorporated gradations of '1+' (one
plus) and '1-' (one minus) to assist investors in recognizing those differences.
Duff 1+--Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free US Treasury short-term
obligations.
Duff 1--Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors are
minor.
Duff 1- -- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small.
Duff 2--Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
Duff 3--Satisfactory liquidity and other protection factors qualify issue
as to investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Duff 4--Speculative investment characteristics. Liquidity is not sufficient
to ensure against disruption in debt service. Operating factors and market
access may be subject to a high degree of variation.
Duff 5--Issuer failed to meet scheduled principal and/or interest payments.
IBCA, INC. In addition to conducting a careful review of an institution's
reports and published figures, IBCA's analysts regularly visit the companies for
discussions with senior management. These meetings are fundamental to the
preparation of individual reports and ratings. To keep abreast of any changes
that may affect assessments, analysts maintain contact throughout the year with
the management of the companies they cover.
IBCA's analysts speak the languages of the countries they cover, which is
essential to maximize the value of their meetings with management and to
properly analyze a company's written materials. They also have a thorough
knowledge of the laws and accounting practices that govern the operations and
reporting of companies within the various countries.
Often, in order to ensure a full understanding of their position, companies
entrust IBCA with confidential data. While these data cannot be disclosed in
reports, they are taken into account when assigning ratings. Before dispatch to
subscribers, a draft of the report is submitted to each company to permit
correction of any factual errors and to enable clarification of issues raised.
IBCA's Rating Committees meet at regular intervals to review all ratings
and to ensure that individual ratings are assigned consistently for institutions
in all the countries covered. Following the Committee meeting, ratings are
issued directly to subscribers. At the same time, the company is informed of the
ratings as a manner of courtesy, but not for discussion.
Al+--Obligations supported by the highest capacity for timely repayment.
A-10
<PAGE> 16
A1--Obligations supported by a very strong capacity for timely repayment.
A2--Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.
Bl--Obligations supported by an adequate capacity for timely repayment.
Such capacity is more susceptible to adverse changes in business, economic, or
financial conditions than for obligations in higher categories.
B2--Obligations for which the capacity for timely repayment is susceptible
to adverse changes in business, economic or financial conditions.
C1--Obligations for which there is an inadequate capacity to ensure timely
repayment.
D1 --Obligations which have a high risk of default or which are currently
in default.
RISK FACTORS
The shares of the Trust have not been registered under the 1933 Act and,
because they will be offered only to a limited number of qualified investors, it
is anticipated that they will be exempt from the registration provisions
thereof. Shares of the Trust may not be transferred or resold without
registration under the 1933 Act or pursuant to an exemption from such
registration. However, shares of the Trust may be redeemed in accordance with
the terms of the Declaration of Trust and the Confidential Offering Memorandum
provided to shareholders.
Investments in shares of the Trust are neither insured nor guaranteed by
the government. There is no assurance that either Navigator Government Portfolio
or Navigator Prime Portfolio Series of the Trust will maintain a stable net
asset value of $1.00 per share. Shares in the Trust are not deposits or
obligations of, or guaranteed or endorsed by, State Street, and shares are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency, and involve investment risks including the
possible loss of principal.
ITEM 5. MANAGEMENT OF THE TRUST
THE BOARD OF TRUSTEES
Under Massachusetts law, the Board of Trustees of the Trust has overall
responsibility for managing the Trust in good faith and in a manner that
represents the best interests of the Trust. This management responsibility may
be delegated. Accordingly, the Board of Trustees supervises the management,
activities and affairs of the Trust and has approved contracts with State Street
to provide day-to-day management required by the Trust.
THE ADVISER
The Trustees, including a majority of the Trustees that are not "interested
persons" of the Trust, as such term is defined in Section 2(a)(19) of the 1940
Act ("Independent Trustees"), have authorized State Street to serve as the
investment adviser, custodian, transfer agent and administrator of the Trust
with respect to Navigator Prime Portfolio. The Trustees have not yet authorized
an investment adviser with respect to Navigator Government Portfolio and
Navigator Short-Term Bond Portfolio.
State Street is a Massachusetts-chartered trust company and a member of the
Federal Reserve System. It is a wholly owned subsidiary of State Street Boston
Corporation, a publicly-held corporation and holding company registered under
the Federal Bank Holding Company Act of 1956, as amended. State Street is among
A-11
<PAGE> 17
the world's largest providers of institutional custody services, with assets
under custody at December 31, 1995 of approximately $2.28 trillion. State Street
also provides asset management services for numerous pension plans, foundations,
governmental plans and high net worth individuals, and serves as the investment
adviser or subadviser for several registered management investment companies,
including The Seven Seas Series Fund. At December 31, 1995, State Street had
discretionary investment management authority with respect to approximately
$2.26 billion in assets.
State Street, which was the first custodian bank to provide securities
lending services on a 24-hour basis through non-U.S. lending offices, currently
administers the world's largest securities lending program. On average, during
fiscal year 1995, State Street served as securities lending agent with respect
to loan transactions involving in excess of $51 billion on loan. Approximately
160 Lenders participated in the Bank's securities lending program during such
period. State Street estimates that it effects more than 1,000 securities loan
transactions on behalf of these Lenders each business day.
For the services it provides as adviser for Navigator Prime Portfolio,
State Street will receive a fee equal on an annual basis to 0.0175% of the
average annual net assets of Navigator Prime Portfolio. The contractual
arrangements between the Trust and State Street have been approved initially for
a two-year term by the Trustees, including a majority of the Independent
Trustees, and will continue thereafter from year to year provided that the
arrangements are approved by the Trustees, including a majority of the
Independent Trustees. Shares of Navigator Prime Portfolio will be registered
with the Trust's transfer agent in the name of State Street, as agent for each
Lender, or the name of the Lender's custodian. State Street will pass through to
each beneficial owner all voting rights with respect to the shares. No officer,
director or employee of State Street will be an officer, trustee or employee of
the Trust, unless permitted by applicable law.
The name and title of the persons employed by State Street to manage the
day-to-day operations of Navigator Prime Portfolio, the length of time that each
person has had such responsibility and each person's business experience during
the past five years are set forth below:
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER PRIMARY PORTFOLIO BUSINESS EXPERIENCE
AND TITLE MANAGER SINCE DURING THE PAST FIVE YEARS
- --------------------------------------------------------------------------------
Robert Ford, March 21, 1996 Portfolio Manager at the Dreyfus
Portfolio Manager Corp. through 3/96; State Street
from 3/96 to present
- --------------------------------------------------------------------------------
TRUST EXPENSES
The Trust will pay all of its expenses other than those expressly assumed
by State Street. The principal expenses of the Trust are the fees for advisory
services, administration, custody and transfer agency services, all of which are
payable to State Street. Other expenses include: (i) amortization of deferred
organizational costs; (ii) taxes, if any; (iii) expenses for legal, auditing and
financial accounting services; (iv) expense of preparing (including typesetting,
printing and mailing) reports and notices to existing shareholders; (v) expense
of issuing and redeeming Trust shares; (vi) the fees, travel expenses and other
out-of-pocket expenses of Trustees who are not affiliated with State Street or
any of its affiliates; (vii) extraordinary expenses as may arise, including
expenses incurred in connection with litigation proceedings and claims and the
legal obligations of the Trust to indemnify its Trustees, shareholders and
agents; and (viii) other expenses properly payable by the Trust.
ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Not Applicable.
A-12
<PAGE> 18
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
ATTRIBUTES OF PORTFOLIO SHARES
The Trust issues a single class of shares divisible into an unlimited
number of portfolio series, each of which is a separate and distinct sub-trust
of the Trust. Each share of each sub-trust represents an equal proportionate
interest in that sub-trust, has a par value of $.001 per share and is entitled
to such dividends and distributions earned on assets belonging to such sub-trust
as may be declared by the Trustees. Shares of the Trust are fully paid and
non-assessable by the Trust and shareholders have no preemptive or appraisal
rights.
Each Trust share has one vote. Shareholders of the Trust have power to vote
only (i) for the election or removal of Trustees, (ii) with respect to contracts
as to which shareholder approval is required by the 1940 Act, (iii) with respect
to any termination or reorganization of the Trust, (iv) with respect to the
amendment of the Declaration of Trust, (v) to the same extent as stockholders of
a Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or any sub-trust thereof or the
shareholders (provided, however, that a shareholder of a particular sub-trust
shall not be entitled to a derivative or class action on behalf of any other
sub-trust (or shareholder of any other sub-trust) of the Trust and (vi) with
respect to such additional matters relating to the Trust as may be required by
the 1940 Act, the Declaration of Trust, the Trust's Bylaws or as the Trustees
may consider necessary or desirable.
No annual or regular meeting of shareholders is required. Special meetings
of shareholders may be called by the Trustees from time to time for the purpose
of taking action upon any matter requiring the vote or authority of the
shareholders as provided in the Declaration of Trust or as deemed necessary or
desirable by the Trustees.
Shares of the Trust are not registered under the 1933 Act or the securities
law of any state and are sold in reliance upon an exemption from registration.
Shares may not be transferred or resold without registration under the 1933 Act,
except pursuant to an exemption from registration. However, shares may be
redeemed on any day on which State Street is open for business (a "Business
Day").
CONTROL PERSONS
As of May 31, 1996, Caisse de depot et Placement du Quebec beneficially
owned more than 25 per centum of the voting securities of the Trust.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to State Street.
DIVIDENDS AND DISTRIBUTIONS
The Trustees intend to declare dividends daily on shares of each Portfolio
from net investment income and to pay such dividends as of the last business day
of each month. Distributions from net long-term capital gains, if any, will be
made at least annually. In most instances, distributions will be declared and
paid in mid-October with additional distributions declared and paid in December,
if required for a Portfolio to avoid imposition of a 4% federal excise tax on
distributed capital gains. It is anticipated that the Portfolios will not
realize any material long-term capital gains or losses. Income dividends and
capital gains distributions, if any, will be paid in additional shares at their
net asset value on the payment date of the dividend or distribution. A
shareholder's right to receive dividends and distributions with respect to
shares purchased commences on the effective date of the purchase of such shares
and continues through the day immediately preceding the effective date of
redemption of such shares.
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<PAGE> 19
TAX CONSEQUENCES
Each Portfolio intends to qualify as a regulated investment company ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a RIC, a Portfolio will not be subject to federal income taxes to
the extent it distributes its net investment income and capital gain net income
(capital gains in excess of capital losses) to shareholders. The Board of
Trustees intends to distribute each year substantially all of each Portfolio's
net investment income and capital gain net income. No Portfolio expects to be
subject to any state or local taxes.
Dividends from net investment income and distributions of net short-term
capital gains are taxable to shareholders as ordinary income under federal
income tax laws whether paid in cash or in additional shares. Distributions from
net long-term capital gains are taxable as long-term capital gains regardless of
the length of time a shareholder has held such shares.
Each Portfolio may purchase bonds at market discount (i.e., bonds with a
purchase price less than original issue price or adjusted issue price). If such
bonds are subsequently sold at a gain, then a portion of that gain equal to the
amount of market discount, which should have been accrued through the sale date,
will be taxable to shareholders as ordinary income.
Under federal law, the income derived from U.S. Government Securities is
exempt from state income taxes. All states that tax personal income, other than
Pennsylvania, permit mutual funds to pass this tax exemption through to their
shareholders. Income from repurchase agreements in which the underlying
securities are U.S. Government Securities does not receive this exempt
treatment.
The sale of Portfolio shares by a shareholder is a taxable event and may
result in capital gain or loss. A capital gain or loss may be realized from an
ordinary redemption of shares or an exchange of shares between two Portfolios.
Any loss incurred on a sale or exchange of Portfolio shares, held for one year
or more, will be treated as a long-term capital loss to the extent of capital
gain dividends received with respect to such shares.
Shareholders will be notified after each calendar year of the amount of
income dividends and net capital gains distributed and the percentage of a
Portfolio's income attributable to U.S. Government Securities. Each Portfolio is
required to withhold 31% of all taxable dividends, distributions and redemption
proceeds payable to any noncorporate shareholder that does not provide the
Portfolio with the shareholder's correct taxpayer identification number or
certification that the shareholder is not subject to backup withholding.
The foregoing discussion is only a summary of certain federal income tax
issues generally affecting each Portfolio and its shareholders. Circumstances
among investors may vary and each investor is encouraged to discuss an
investment in a Portfolio with such investor's tax adviser.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED
Shares of each operating Portfolio are available for purchase on each
Business Day. Purchases are effected on behalf of a Lender by State Street, in
its capacity as securities lending agent for the Lender. All shares are
purchased at the net asset value per share of the Portfolio next determined
after the purchase is communicated to the Trust. Each of Navigator Government
Portfolio and Navigator Prime Portfolio will seek to maintain a stable net asset
value per share of $1.00 by valuing its investment portfolio using the amortized
cost method and will comply with the requirements of Rule 2a-7 under the 1940
Act. Navigator Short-Term Bond Portfolio will not seek to maintain a stable net
asset value per share by means of the amortized cost method. By means of
managing the average effective duration of Navigator Short-Term Bond Portfolio,
however, State Street will seek to minimize fluctuations in the value of the
Portfolio. Securities with maturities of 60 days or less will be valued based
upon the amortized cost method. The value of all other securities will be
determined based upon market value or, in the absence of market value, at fair
value as determined by the Board of Trustees of the Trust.
A-14
<PAGE> 20
ITEM 8. REDEMPTION OR REPURCHASE
Shares of each operating Portfolio may be redeemed on each Business Day at
the net asset value per share of the Portfolio next determined after the
redemption is communicated to the Trust. Redemptions are effected on behalf of a
Lender by State Street, in its capacity as lending agent for the Lender.
The net asset value per share of each operating Portfolio is determined as
of the close of the regular trading session of the New York Stock Exchange
(ordinarily, 4:00 p.m. New York time).
ITEM 9. PENDING LEGAL PROCEEDINGS
None.
A-15
<PAGE> 21
PART B
<PAGE> 22
ITEM 10. COVER PAGE
NAVIGATOR SECURITIES LENDING TRUST
----------------------------------
Two International Place, 31st Floor
Boston, Massachusetts 02110
(617) 664-2500
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
NAVIGATOR GOVERNMENT PORTFOLIO
NAVIGATOR PRIME PORTFOLIO
NAVIGATOR SHORT-TERM BOND PORTFOLIO
JUNE 20, 1996
Navigator Securities Lending Trust (the "Trust") is a registered open-end
investment company organized as a Massachusetts business trust offering shares
of beneficial interest in separate investment portfolios. In addition, each
series of the Trust is diversified as defined in the Investment Company Act of
1940, as amended (the "1940 Act").
This Statement of Additional Information supplements information concerning
the Trust and its portfolios, Navigator Government Portfolio, Navigator Prime
Portfolio and Navigator Short-Term Bond Portfolio (each, a "Portfolio" and
collectively, the "Portfolios"), contained in the Trust's Prospectus dated June
20, 1996. As of the date hereof, Navigator Government Portfolio and Navigator
Short-Term Bond Portfolio are not operational. This Statement is not a
Prospectus and should be read in conjunction with the Trust's Prospectus, which
may be obtained by telephoning or writing the Trust at the number or address
shown above.
B-1
<PAGE> 23
ITEM 11. TABLE OF CONTENTS
Page
----
GENERAL INFORMATION AND HISTORY...................................... B-3
INVESTMENT OBJECTIVES AND POLICIES................................... B-3
MANAGEMENT OF THE REGISTRANT......................................... B-4
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.................. B-5
INVESTMENT ADVISORY AND OTHER SERVICES............................... B-6
BROKERAGE ALLOCATION AND OTHER PRACTICES............................. B-7
CAPITAL STOCK AND OTHER SECURITIES................................... B-8
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED......... B-9
TAX STATUS........................................................... B-10
UNDERWRITERS......................................................... B-11
CALCULATION OF PERFORMANCE DATA...................................... B-11
FINANCIAL STATEMENTS................................................. B-12
B-2
<PAGE> 24
ITEM 12. GENERAL INFORMATION AND HISTORY
The Trust has no prior business history.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT RESTRICTIONS
The Trust has adopted the following fundamental investment policies, which,
with respect to a Portfolio, may not be changed without the approval of a
majority of the shareholders of the Portfolio. No Portfolio may:
1. Borrow money, except as a temporary measure for extraordinary or
emergency purposes or to facilitate redemptions (not for leveraging or
investment), provided that borrowing does not exceed an amount equal
to 33 1/3% of the current value of the Portfolio's assets taken at
market value, less liabilities, other than borrowings. If at any time
the Portfolio's borrowings exceed this limitation due to a decline in
net assets, such borrowings will, within three days, be reduced to the
extent necessary to comply with this limitation. The Portfolio will
not purchase investments once borrowed funds (including reverse
repurchase agreements) exceed 5% of its total assets.
2. Make loans to any person or firm; provided, however, that the making
of a loan shall not include (i) the acquisition for investment of
bonds, debentures, notes or other evidence of indebtedness which is
publicly distributed or of a type customarily purchased by
institutional investors, or (ii) the entering into repurchase
agreements, and provided further that a Portfolio may lend its
portfolio securities to broker-dealers or other institutional
investors if the aggregate value of all securities loaned does not
exceed 33 1/3% of the value of the Portfolio's total assets.
3. Engage in the business of underwriting securities issued by others,
except that a Portfolio will not be deemed to be an underwriter or to
be underwriting on account of the purchase or sale of securities
subject to legal or contractual restrictions on disposition.
4. Issue senior securities, except as permitted by its investment
objective, policies and restrictions, and except as permitted by the
1940 Act.
5. Invest 25% or more of the value of its total assets in securities of
companies primarily engaged in any one industry (other than the U.S.
Government, its agencies and instrumentalities); provided, however,
that concentration may occur as a result of changes in the market
value of portfolio securities. Foreign and domestic branches of U.S.
banks and U.S. branches of foreign banks are not considered a single
industry for purposes of this restriction.
6. With respect to 75% of its total assets, invest in securities of any
one issuer (other than securities issued by the U.S. Government, its
agencies and instrumentalities), if immediately thereafter and as a
result of such investment (i) the current market value of the
Portfolio's holdings in the securities of such issuer exceeds 5% of
the value of the Portfolio's assets or (ii) the Portfolio owns more
than 10% of the outstanding voting securities of the issuer.
7. Purchase or sell real estate or real estate mortgage loans; provided,
however, that a Portfolio may invest in securities secured by real
estate or interests therein or issued by companies which invest in
real estate or interests therein.
B-3
<PAGE> 25
8. Invest in commodities, except that a Portfolio may purchase and sell
financial futures contracts and options thereon.
INVESTMENT POLICIES
See Item 4 in Part A for a description of the Trust's investment policies.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Portfolio is calculated by dividing
the lesser of purchases or sales of the Portfolio's securities for the
particular year, by the monthly average value of the Portfolio's securities
owned during the year. For purposes of determining the rate, all short-term
securities, including options, futures, forward contracts and repurchase
agreements, are excluded.
ITEM 14. MANAGEMENT OF THE REGISTRANT
BACKGROUND INFORMATION
The Board of Trustees is responsible for overseeing generally the operation
of the Portfolios. State Street serves as the Trust's adviser, custodian,
transfer agent and administrator.
<TABLE>
The following table sets forth the name, address and age of the Trust's
Trustees and officers, their positions with the Trust and their present and
principal occupations during the past five years. An asterisk (*) indicates that
a Trustee is an "interested person" of the Trust, as defined in the 1940 Act.
- ----------------------------------------------------------------------------------------------------
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH THE TRUST PRINCIPAL OCCUPATION
DURING PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
*Michael A. Jessee, 49 President and Chief Executive
One Financial Center, 20th Floor Trustee Officer of the Federal Home
Boston, Massachusetts 02110 Loan Bank of Boston since June
5, 1989; member of National
Association of Home Builders'
Mortgage Round Table; Director
of Financial Institutions
Retirement Fund; Vice Chairman
of the Board of the Bank System
Office of Finance; Chairman
of the Financing Corporation;
member of the Multifamily
Housing Institute
- ----------------------------------------------------------------------------------------------------
George J. Sullivan, Jr., 53 General Partner, Teton Partners,
260 Franklin Street Trustee L.P.; prior to 1992, an officer at
Boston, Massachusetts 02110 Fidelity Accounting and Custody
Service Company and Fidelity
Service Company; member of
the American Institute and
Massachusetts Society of CPAs
- ----------------------------------------------------------------------------------------------------
</TABLE>
B-4
<PAGE> 26
<TABLE>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Peter Tufano, 38 Associate Professor of Business
Graduate School of Administration at Harvard
Business Administration Trustee Business School since 1994;
Harvard University Faculty Research Fellow at the
Boston, Massachusetts 02168 National Bureau of Economic
Research
- ----------------------------------------------------------------------------------------------------
Raymond P. Boulanger, 52 Secretary Partner, Goodwin, Procter &
Goodwin, Procter & Hoar LLP Hoar LLP
Exchange Place
Boston, Massachusetts 02109
- ----------------------------------------------------------------------------------------------------
Philip H. Newman, 43 Assistant Secretary Partner, Goodwin, Procter &
Goodwin, Procter & Hoar LLP Hoar LLP
Exchange Place
Boston, Massachusetts 02109
- ----------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION
<TABLE>
The following table describes the compensation to be received by the
Trustees from the Trust.
- ---------------------------------------------------------------------------------------------------------------------
TRUSTEE COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
AGGREGATE PENSION OR ESTIMATED TOTAL
COMPENSATION RETIREMENT ANNUAL COMPENSATION
FROM BENEFITS ACCRUED BENEFITS UPON FROM INVESTMENT
TRUSTEE INVESTMENT AS PART OF RETIREMENT COMPANY PAID TO
COMPANY INVESTMENT TRUSTEES
COMPANY
EXPENSES
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael A. Jessee * None None *
- ---------------------------------------------------------------------------------------------------------------------
George J. Sullivan, Jr. * None None *
- ---------------------------------------------------------------------------------------------------------------------
Peter Tufano * None None *
- ---------------------------------------------------------------------------------------------------------------------
<FN>
*Each Trustee shall receive a fee of $3,750 for each meeting of the Board of
Trustees he attends and shall be reimbursed for expenses incurred in attending
such meetings.
</TABLE>
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
CONTROLLING SHAREHOLDERS
As of May 31, 1996, Caisse de depot et Placement du Quebec beneficially
owned more than 25 per centum of the voting securities of the Trust.
In connection with State Street's securities lending program, State Street
holds certain collateral on behalf of its securities lending clients to secure
the return of loaned securities. Such collateral may be invested in Trust shares
from time to time. State Street, however, will pass through voting rights to its
securities lending clients that have a beneficial interest in a Portfolio.
Consequently, State Street will not be a controlling person of the Trust for
purposes of the 1940 Act.
B-5
<PAGE> 27
PRINCIPAL SHAREHOLDERS
As of May 31, 1996, there were no shares outstanding for Navigator
Government Portfolio or Navigator Short-Term Bond Portfolio, and the following
shareholder owned of record 5% or more of the issued and outstanding shares of
Navigator Prime Portfolio:
o Caisse de depot et Placement du Quebec
The Trustees and officers of the Trust, as a group, own less than 1% of the
Trust's voting securities.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
SERVICE PROVIDERS
Most of the Portfolios' necessary day-to-day operations are or will be
performed by separate business organizations under contract to the Trust. The
principal service providers for Navigator Prime Portfolio are:
Investment Adviser, Custodian,
Transfer Agent and Administrator: State Street Bank and Trust Company
Independent Accountants: Price Waterhouse LLP
The Trust has not yet entered into investment advisory or other service
agreements with respect to Navigator Government Portfolio and Navigator
Short-Term Bond Portfolio.
ADVISER
State Street (or the "Adviser") serves as the investment adviser to
Navigator Prime Portfolio pursuant to an Advisory Agreement dated as of March 4,
1996 ("Advisory Agreement") by and between State Street and the Trust. State
Street Bank and Trust Company is a wholly owned subsidiary of State Street
Boston Corporation, a publicly held bank holding company. State Street's mailing
address is 225 Franklin Street, Boston, MA 02110.
Under the Advisory Agreement, the Adviser directs Navigator Prime
Portfolio's investments in accordance with its investment objectives, policies
and limitations. For these services, the Portfolio pays a fee to the Adviser at
the rates stated in the Prospectus.
The contractual arrangements between the Trust and the Adviser have been
approved initially for a two-year term by the Trustees, including a majority of
the Trustees that are not "interested persons" of the Trust, as such term is
defined in Section 2(a)(19) of the 1940 Act ("Independent Trustees"), and will
continue thereafter from year to year provided that the arrangements are
approved by the Trustees, including a majority of the Independent Trustees. The
Agreement may be terminated without penalty by the Adviser upon 90 days' written
notice or by Navigator Prime Portfolio upon 60 days' written notice and will
terminate automatically upon its assignment.
ADMINISTRATOR
State Street (or the "Administrator") serves as Navigator Prime Portfolio's
administrator pursuant to an Administration Agreement dated March 4, 1996
("Administration Agreement') by and between State Street and the Trust. Under
the Administration Agreement, the Administrator will, among other things: (i)
provide Navigator Prime Portfolio with administrative and clerical services,
including the maintenance of certain of the Portfolio's books and records; (ii)
arrange the periodic updating of the Portfolio's Prospectuses and any
supplements thereto; and (iii) provide proxy materials and reports to Portfolio
shareholders and the Securities
B-6
<PAGE> 28
and Exchange Commission (the "SEC"). For these services, the Portfolio pays to
the Administrator an annual fee based on the asset value of the Trust. The fee
will be calculated by multiplying the first $300 million in assets per Portfolio
by 0.0035, the next $300 million in assets per Portfolio by 0.0020 and any
amounts above $600 million in assets per Portfolio by .0005.
The Administration Agreement has been approved initially for a two-year
term by the Trustees, and will continue from year to year unless terminated in
writing by either the Administrator or the Trust at the end of such period or
thereafter on 60 days' prior written notice given by either party to the other
party.
CUSTODIAN AND TRANSFER AGENT
State Street serves as the custodian ("Custodian") and transfer agent
("Transfer Agent") for the Trust. State Street also provides the basic portfolio
recordkeeping required by the Trust for regulatory and financial reporting
purposes.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the Trust's independent accountants.
Price Waterhouse LLP is responsible for performing annual audits of the
financial statements and financial highlights in accordance with generally
accepted auditing standards, a review of federal tax returns, and, pursuant to
Rule 17f-2 of the 1940 Act, three security counts. The mailing address of Price
Waterhouse LLP is 160 Federal Street, Boston, MA 02110.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES
All portfolio transactions are placed on behalf of the Portfolios by
the Adviser. There is generally no stated commission in the purchase or sale of
securities traded in the over-the-counter markets, including most debt
securities and money market instruments. Rather, the price of such securities
includes an undisclosed commission in the form of a mark-up or mark-down. The
cost of securities purchased from underwriters includes an underwriting
commission or concession.
Subject to the arrangements and provisions described below, the
selection of a broker or dealer to execute portfolio transactions is usually
made by the Adviser. The Advisory Agreement provides, in substance and subject
to specific directions from the Trust's Board of Trustees, that in executing
portfolio transactions and selecting brokers or dealers, the principal objective
is to seek the best net price and execution for the Trust. Ordinarily,
securities will be purchased from primary markets, and the Adviser shall
consider all factors it deems relevant in assessing the best overall terms
available for any transaction, including the breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, for the specific transaction and other transactions on a continuing basis.
The Advisory Agreement authorizes the Adviser to select brokers or
dealers to execute a particular transaction, including principal transactions.
Also, in evaluating the best overall terms available, the Adviser may consider
the "brokerage and research services" (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934, as amended) provided to the
Portfolios and/or the Adviser (or its affiliates). The Adviser is authorized to
cause the Portfolios to pay a commission to a broker or dealer who provides such
brokerage and research services for executing a portfolio transaction which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction. The Adviser must determine in good faith
that such commission was reasonable in relation to the value of the brokerage
and research services provided.
The Trustees periodically review the Adviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Portfolios and review the prices paid by the Portfolios
B-7
<PAGE> 29
over representative periods of time to determine if such prices are reasonable
in relation to the benefits provided to the Portfolios. Certain services
received by the Adviser attributable to a particular Portfolio transaction may
benefit one or more other accounts for which the Adviser exercises investment
discretion, or a Portfolio other than that for which the transaction was
effected. The Adviser's fees are not reduced by the Adviser's receipt of such
brokerage and research services.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES
The Trust was organized as a Massachusetts business trust on June 15, 1995
and operates under a Master Trust Agreement, dated June 15, 1995. The Trust is
authorized to issue shares of beneficial interest, par value $.001 per share,
which may be divided into one or more series, each of which evidences pro rata
ownership interest in a different investment portfolio. The Trustees may create
additional portfolio series at any time without shareholder approval. The shares
of each portfolio series may have such rights and preferences as the Trustees
may establish from time to time, including the right of redemption (including
the price, manner and terms of redemption), special and relative rights as to
dividends and distributions, liquidation rights, sinking or purchase fund
provisions, conversion rights and conditions under which any portfolio series
may have separate voting rights or no voting rights.
As of the date of this Statement of Additional Information, the Trust is
comprised of the following portfolio series, each of which commenced operations
on the date set forth opposite the Portfolio's name:
- --------------------------------------------------------------------------------
COMMENCEMENT OF
NAME OPERATIONS
- --------------------------------------------------------------------------------
Navigator Prime Portfolio March 21, 1996
- --------------------------------------------------------------------------------
Navigator Government Portfolio *
- --------------------------------------------------------------------------------
Navigator Short-Term Bond Portfolio *
- --------------------------------------------------------------------------------
- --------------
* As of the date of this Statement of Additional Information, these
Portfolios have not commenced operations.
The Trust is authorized, without shareholder approval, to divide shares
of any series into two or more classes of shares, each class having such
different dividend, liquidation, voting and other rights as the Trustees may
determine.
Any amendment to the Master Trust Agreement that would materially and
adversely affect shareholders of the Trust as a whole, or shareholders of a
particular portfolio series, must be approved by the holders of a majority of
the shares of the Trust or the portfolio series, respectively. All other
amendments may be effected by the Trust's Board of Trustees.
The Master Trust Agreement provides that shareholders shall not be
subject to any personal liability for the acts or obligations of a portfolio
series and that every written agreement, obligation, or other undertaking of a
portfolio series shall contain a provision to the effect that the shareholders
are not personally liable thereunder. If any present or past shareholder of any
portfolio series of the Trust is charged or held personally liable for any
obligation or liability of the Trust solely by reason of being or having been a
shareholder and not because of such shareholder's acts or omissions or for some
other reason, the portfolio series, upon request, shall assume the defense
against such charge and satisfy any judgment thereon, and the shareholder or
former shareholder shall be entitled out of the assets of such portfolio series
to be held harmless from and indemnified against all loss and expense arising
from such liability. Thus, the risk to shareholders of incurring financial loss
B-8
<PAGE> 30
beyond their investments is limited to circumstances in which the portfolio
series itself would be unable to meet its obligations.
The Trust will not have an Annual Meeting of Shareholders. Special
Meetings may be convened: (i) by the Board of Trustees; (ii) upon written
request to the Board of Trustees by the holders of at least 10% of the
outstanding shares; or (iii) upon the Board of Trustee's failure to honor the
shareholders' request described above, by holders of at least 10% of the
outstanding shares giving notice of the special meeting to the shareholders.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
MANNER IN WHICH SHARES ARE OFFERED
Shares of Navigator Prime Portfolio are being offered to clients of
State Street's securities lending program. Shares are sold on a private
placement basis in accordance with Regulation D under the 1933 Act, are sold
directly by the Trust without a distributor and are not subject to a sales load
or redemption fee; assets of the Trust are not subject to a Rule 12b-1 fee.
VALUATION OF FUND SHARES
NAVIGATOR PRIME PORTFOLIO AND NAVIGATOR GOVERNMENT PORTFOLIO. Net asset
value per share for the shares of each of Navigator Prime Portfolio and
Navigator Government Portfolio is calculated twice each business day, as of
12:00 noon Eastern time and as of the close of the regular trading session on
the New York Stock Exchange (currently 4:00 p.m. Eastern time). A business day
is one on which both the Boston Federal Reserve and the New York Stock Exchange
are open for business.
It is the policy of each of the Portfolios to use its best efforts to
maintain a constant price per share of $1.00, although there can be no assurance
that the $1.00 net asset value per share will be maintained. In accordance with
this effort and pursuant to Rule 2a-7 under the 1940 Act, each Portfolio uses
the amortized cost valuation method to value its portfolio instruments. This
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium even though the
portfolio security may increase or decrease in market value generally in
response to changes in interest rates. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price a Portfolio would receive if
it sold the instrument.
The Trustees have established procedures reasonably designed to
stabilize each Portfolio's price per share at $1.00. These procedures include:
(i) the determination of the deviation from $1.00, if any, of each Portfolio's
net asset value using market values; (ii) periodic review by the Trustees of the
amount of and the methods used to calculate the deviation; and (iii) maintenance
of records of such determination. The Trustees will promptly consider what
action, if any, should be taken if such deviation exceeds 1/2 of one percent.
NAVIGATOR SHORT-TERM BOND PORTFOLIO. Net asset value per share is
calculated once each business day for Navigator Short-Term Bond Portfolio as of
the close of the regular trading session on the New York Stock Exchange
(currently 4:00 p.m. Eastern time). A business day is one on which the New York
Stock Exchange is open for business. Currently, the New York Stock Exchange is
open for trading every weekday except New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
With the exceptions noted below, the Portfolio values its investment
portfolio at market value. This generally means that equity securities and fixed
income securities listed and traded principally on any national securities
exchange are valued on the basis of the last sale price or, lacking any sales,
at the closing bid price, on the primary exchange on which the security is
traded. United States equity and fixed-income securities
B-9
<PAGE> 31
traded principally over-the-counter and options are valued on the basis of the
last reported bid price. Futures contracts are valued on the basis of the last
reported sale price.
Because many fixed income securities do not trade each day, last sale
or bid prices are frequently not available. Therefore, fixed income securities
may be valued using prices provided by a pricing service when such prices are
determined by the Custodian to reflect the market value of such securities.
International securities traded over-the-counter are valued on the
basis of best bid or official bid, as determined by the relevant securities
exchange. In the absence of a last sale or best or official bid price, such
securities may be valued on the basis of prices provided by a pricing service if
those prices are believed to reflect the market value of such securities.
The Portfolio values securities maturing within 60 days of the
valuation date at amortized cost unless the Board of Trustees determines that
amortized cost does not represent market value. This method involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, even though the portfolio security may
increase or decrease in market value generally in response to changes in
interest rates. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if it sold the instrument.
ITEM 20. TAX STATUS
FEDERAL TAXES
Each Portfolio intends to qualify for treatment as a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). As a RIC, each Portfolio will not be liable for
federal income taxes on taxable net investment income and capital gain net
income (capital gains in excess of capital losses) that it distributes to its
shareholders, provided that the Portfolio distributes annually to its
shareholders at least 90% of its net investment income and net short-term
capital gain for the taxable year ("Distribution Requirement"). For a Portfolio
to qualify as a RIC it must abide by all of the following requirements: (i) at
least 90% of the Portfolio's gross income each taxable year must be derived from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock or securities or foreign currencies, or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies
("Income Requirement"); (ii) less than 30% of the Portfolio's gross income each
taxable year must be derived from the sale or other disposition of securities
and certain options, futures contracts, forward contracts and foreign currencies
held for less than three months ("Short-Short Limitation"); (iii) at the close
of each quarter of the Portfolio's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICS, and other securities, with such other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the total assets of the Portfolio and that does not represent more
than 10% of the outstanding voting securities of such issuer, and (iv) at the
close of each quarter of the Portfolio's taxable year, not more than 25% of the
value of its assets may be invested in securities (other than U.S. Government
securities or the securities of other RICS) of any one issuer.
Each Portfolio will be subject to a nondeductible 4% excise tax to the
extent it fails to distribute by the end of any calendar year an amount at least
equal to the sum of: (a) 98% of its ordinary income for that year; (b) 98% of
its capital gain net income for the one-year period ending on October 31 of that
year; and (c) certain undistributed amounts from the preceding calendar year.
For this and other purposes, dividends declared in October, November or December
of any calendar year and made payable to shareholders of record in such month
will be deemed to have been received on December 31 of such year if the
dividends are paid by the Portfolio subsequent to December 31 but prior to
February 1 of the following year.
B-10
<PAGE> 32
If a shareholder receives a distribution taxable as long-term capital
gain with respect to shares of a Portfolio and redeems or exchanges the shares
without having held the shares for more than six months, then any loss on the
redemption or exchange will be treated as long-term capital loss to the extent
of the capital gain distribution.
STATE AND LOCAL TAXES
Depending upon the extent of each Portfolio's activities in states and
localities in which its offices are maintained, its agents or independent
contractors are located or it is otherwise deemed to be conducting business, the
Portfolio may be subject to the tax laws of such states or localities.
The foregoing discussion is only a summary of certain federal and state
income tax issues generally affecting the Portfolios and their shareholders.
Circumstances among investors may vary and each investor is encouraged to
discuss investments in the Portfolios with the investor's tax adviser.
ITEM 21. UNDERWRITERS
Not Applicable.
ITEM 22. CALCULATION OF PERFORMANCE DATA
AVERAGE ANNUAL TOTAL RETURN
NAVIGATOR SHORT-TERM BOND PORTFOLIO. Navigator Short-Term Bond
Portfolio computes average annual total return by using a standardized method of
calculation required by the SEC. Average annual total return is computed by
finding the average annual compounded rates of return on a hypothetical initial
investment of $1,000 over the one-, five- and ten-year periods (or the life of
the Portfolio as appropriate), that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
P (1+T)[SUP n]=ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a $1,000 payment made
at the beginning of the 1-, 5- and 10-year periods
at the end of the year or period
The calculation assumes that all dividends and distributions of the
Portfolio are reinvested at the price calculated in the manner described in the
Prospectus on the dividend dates during the period, and includes all recurring
and nonrecurring fees that are charged to all shareholder account.
YIELD AND EFFECTIVE YIELD
NAVIGATOR PRIME PORTFOLIO AND NAVIGATOR GOVERNMENT PORTFOLIO. The yield
for each Portfolio is calculated daily based upon the seven days ending on the
date of calculation ("base period"). The yields are computed by determining the
net change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the base
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts and dividing the net change in the account value by the value of the
account at the beginning of the base period to obtain the base period return,
and then multiplying the base period return by (365/7) with the resulting yield
figure carried to the nearest hundredth of one percent. An effective yield is
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
B-11
<PAGE> 33
of the account at the beginning of the base period to obtain the base period
return, and then compounding the base period return by adding 1, raising the sum
to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
EFFECTIVE ~ YIELD=[(BASE ~ PERIOD RETURN+1)[SUP{365/7}]]-1
The following are the current and effective yields for Navigator Prime Portfolio
for the seven-day period ended May 31, 1996:
NAVIGATOR PRIME PORTFOLIO
- -------------------------
Current Yield 5.30%
Effective Yield 5.44%
The yields quoted are not indicative of future results. Yields will
depend on the type, quality, maturity, and interest rate of money market
instruments held by the Portfolios.
NAVIGATOR SHORT-TERM BOND PORTFOLIO. Yields are computed by using
standardized methods of calculation required by the SEC. Yields are calculated
by dividing the net investment income per share earned during a 30-day (or one
month) period by the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD = 2[(a-b+1)[sup 6]-1]
---
cd
where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the period
that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of the
period.
Any yield quoted by the Portfolio is not indicative of future results. Yields
will depend on the type, quality, maturity and interest rate of instruments held
by the Portfolio.
ITEM 23. FINANCIAL STATEMENTS
Not Applicable.
B-12
<PAGE> 34
PART C
<PAGE> 35
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Financial Statements included in PART A of this Registration
Statement:
None
(2) Financial Statements included in PART B of this Registration
Statement:
None
(b) Exhibits:
Exhibit No. Description
----------- -----------
1 Master Trust Agreement (Agreement and Declaration of
Trust), effective as of June 15, 1995, and amendments
thereto.
2 By-Laws.
3 None.
4 None.
5 Advisory Agreement.
6 *
7 Not Applicable.
8 Custodian Agreement.
9(a) Transer Agency Agreement.
9(b) Administrative Services Agreement.
10 *
11 *
12 *
13 None.
14 Not Applicable.
- ----------
* Pursuant to General Instruction F4 of Form N-1A, a registration statement
filed under only the Investment Company Act of 1940 shall consist of the
facing sheet of the Form, responses to all items of Parts A and B except
Items 1, 2, 3 and 5A of Part A thereof, responses to all items of Part C
except Items 24(b)(6), 24(b)(10), 24(b)(11), 24(b)(12) and 24(b)(16),
required signatures, and all other documents that are required or which the
Registrant may file as part of the registration statement.
C-1
<PAGE> 36
Exhibit No. Description
----------- -----------
15 Not Applicable.
16 *
18 Not Applicable.
19 Certificate of Assistant Secretary.
27 Financial Data Schedule for Navigator Prime Portfolio.
- ----------
* Pursuant to General Instruction F4 of Form N-1A, a registration statement
filed under only the Investment Company Act of 1940 shall consist of the
facing sheet of the Form, responses to all items of Parts A and B except
Items 1, 2, 3 and 5A of Part A thereof, responses to all items of Part C
except Items 24(b)(6), 24(b)(10), 24(b)(11), 24(b)(12) and 24(b)(16),
required signatures, and all other documents that are required or which the
Registrant may file as part of the registration statement.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is not directly or indirectly controlled by or under common
control with any person other than the Trustees. It does not have any
subsidiaries.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of May 31, 1996, the record holders of each class of Registrant's
securities were as follows:
Title of Class Number of Record Holders
-------------- ------------------------
Navigator Prime Portfolio 196
Navigator Government Portfolio None
Navigator Short-Term Bond Portfolio None
ITEM 27. INDEMNIFICATION
Under Article VI of the Registrant's Master Trust Agreement, the Trust
shall indemnify each of its Trustees and officers (including persons who serve
at the Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a shareholder, creditor or
otherwise (hereinafter referred to as a "Covered Person")) against all
liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, except with respect to any
matter as to which it has been determined that such Covered Person had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's office (such conduct
referred to hereafter as "Disabling Conduct"). A determination that the Covered
Person is entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the
C-2
<PAGE> 37
proceeding was brought that the person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of evidence
of Disabling Conduct, or (iii) a reasonable determination, based upon a review
of the facts, that the indemnitee was not liable by reason of Disabling Conduct
by (a) a vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Trust as defined in section 2(a)(l9) of the Investment Company
Act of 1940, as amended, nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion.
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act of 1933, as amended (the "1933 Act"), may be permitted
to Trustees, officers, underwriters and controlling persons of the Registrant,
pursuant to Article VI of the Registrant's Master Trust Agreement, or otherwise,
the Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted against the Registrant by such Trustee, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
<TABLE>
The Investment Management Division of State Street Bank and Trust
Company ("State Street") serves as adviser to the Registrant. State Street, a
Massachusetts bank, currently manages large institutional accounts and
collective investment funds. The business, profession, vocation or employment of
a substantial nature that each director or officer of the investment adviser is
or has been, at any time during the past two fiscal years, engaged for his own
account or in the capacity of director, officer, employee, partner or trustee,
is as follows:
<CAPTION>
Business and Other
Position Positions Within
Name With Adviser Last Two Years*
---- ------------ ------------------
<S> <C> <C>
Tenley E. Albright, MD Director Chairman, Vital Sciences, Inc.
Joseph A. Baute Director Former Chairman and CEO, Markem Corporation
I. MacAlister Booth Director Chairman, President and CEO, Polaroid
Corporation
Marshall N. Carter Director Chairman and CEO, State Street Bank and Trust Company
James I. Cash, Jr. Director The James E. Robison Professor of Business
Administration, Harvard Business School
Truman S. Casner Director Partner, Ropes & Gray
Nader F. Darehshori Director Chairman, President and CEO, Houghton Mifflin
Company
Arthur L. Goldstein Director Chairman and CEO, Ionics, Inc.
Charles F. Kaye Director President, Transportation Investments, Inc.
</TABLE>
C-3
<PAGE> 38
<TABLE>
<S> <C> <C>
John M. Kucharski Director Chairman, President and CEO, EG&G, Inc.
Charles R. LaMantia, MD Director President and CEO, Arthur D. Little, Inc.
David B. Perini Director Chairman and President, Perini Corporation
Dennis J. Picard Director Chairman and CEO, Raytheon Company
David A. Spina Director President and COO, State Street Bank and Trust Company
Robert E. Weissman Director President and COO, The Dun & Bradstreet Corp.
<FN>
* Address of all individuals: State Street Boston Corporation, 225 Franklin
Street, Boston, Massachusetts 02110
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS
Not Applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, records and documents required by Rule 31a-1 are
maintained in the physical possession of State Street, the Registrant's
investment adviser, administrator, custodian and transfer agent, 225 Franklin
Street, Boston, Massachusetts 02110.
ITEM 31. MANAGEMENT SERVICES
There are no management-related service contracts other than the
Advisory Agreement relating to management services described in PARTS A and B.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
C-4
<PAGE> 39
SIGNATURES
----------
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Registration Statement on Form N-1A
to be signed on its behalf by the undersigned, thereto duly authorized in the
City of Boston, and Commonwealth of Massachusetts on the 20th day of June, 1996.
NAVIGATOR SECURITIES LENDING TRUST
/s/ M. Bradley Jacobs
-----------------------------------
M. Bradley Jacobs, Attorney-In-Fact
C-5
<PAGE> 40
1940 Act File No. 811-07567
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
--------------------
NAVIGATOR SECURITIES LENDING TRUST
----------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
--------------------
EXHIBITS
================================================================================
<PAGE> 41
Index to Exhibits
-----------------
1. Master Trust Agreement (Agreement and Declaration of Trust), effective as
of June 15, 1995, and amendments thereto.
2. By-Laws.
5. Advisory Agreement.
8. Custodian Agreement.
9(a). Transfer Agency Agreement.
9(b). Administrative Services Agreement.
19. Certificate of Assistant Secretary.
27. Financial Data Schedule for Navigator Prime Portfolio.
<PAGE> 1
EXHIBIT 1
---------
<PAGE> 2
GLOBAL LENDING TRUST
MASTER TRUST AGREEMENT
JUNE 15, 1995
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
ARTICLE I - NAME AND DEFINITIONS .................................................. 1
Section 1.1 Name and Principal Office ....................................... 1
Section 1.2 Definitions ..................................................... 1
ARTICLE II - PURPOSE OF TRUST ..................................................... 2
ARTICLE III - THE TRUSTEES ........................................................ 2
Section 3.1 Number, Designation, Election, Term, etc. ....................... 2
Section 3.2 Powers of Trustees .............................................. 4
Section 3.3 Certain Contracts ............................................... 6
Section 3.4 Payment of Trust Expenses and Compensation of Trustee ........... 8
Section 3.5 Ownership of Assets of the Trust ................................ 9
Section 3.6 Ation by Trustees ............................................... 9
ARTICLE IV - SHARES ............................................................... 9
Section 4.1 Description of Shares ........................................... 9
Section 4.2 Establishment and Designation of Sub-Trusts and Classes ......... 11
Section 4.3 Ownership of Shares ............................................. 15
Section 4.4 Investments in the Trust ........................................ 15
Section 4.5 No Pre-emptive Rights ........................................... 15
Section 4.6 Status of Shares and Limitation of Personal Liabili1y ........... 15
</TABLE>
(i)
<PAGE> 4
<TABLE>
<S> <C>
Section 4.7 No Appraisal Rights ............................................. 16
ARTICLE V - SHAREHOLDERS' VOTING POWERS AND MEET1NGS .............................. 16
Section 5.1 Voting Powers ................................................... 17
Section 5.2 Meetings ........................................................ 17
Section 5.3 Record Dates .................................................... 17
Section 5.4 Quorum and Required Vote ........................................ 17
Section 5.5 Action by Written Consent ....................................... 18
Section 5.6 Inspection of Records ........................................... 18
Section 5.7 Additional Provisions ........................................... 18
Section 5.8 Shareholder Communications ...................................... 18
ARTICLE VI - LIMITATION OF LIABILITY; INDEMNIFICATION ............................. 19
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice ...... 19
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety ... 19
Section 6.3 Indemnification of Shareholders ................................. 20
Section 6.4 Indemnification of Trustees, Officers, etc. ..................... 20
Section 6.5 Compromise Payment .............................................. 21
Section 6.6 Indemnification Not Exclusive, etc. ............................. 21
Section 6.7 Liability of Third Persons Dealing with Trustees ................ 21
ARTICLE VII - MISCELLANEOUS ....................................................... 21
Section 7.1 Duration and Termination of Trust ............................... 21
Section 7.2 Reorganization .................................................. 22
Section 7.3 Amendments ...................................................... 22
Section 7.4 Filing of Copies; References; Heading ........................... 23
Section 7.5 Applicable Law .................................................. 23
Section 7.6 Integration ..................................................... 23
(ii)
</TABLE>
<PAGE> 5
MASTER TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts this 15th
day of June, 1995, by the Trustees hereunder, and by the holders of shares of
beneficial interest to be issued hereunder as hereinafter provided.
W I T N E S S E T H:
WHEREAS this Trust has been formed to carry on the business of an
investment company; and
WHEREAS this Trust is authorized to issue its shares of beneficial interest
in separate series, each separate series to be a Sub-Trust hereunder, and to
issue classes of Shares of any Sub-Trust or divide Shares of any Sub-Trust into
two or more classes, all in accordance with the provisions hereinafter set
forth; and
WHEREAS the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts business trust in accordance with the
provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the benefit of the holders from time to time
of shares of beneficial interest in this Trust and the Sub-Trusts created
hereunder as hereinafter set forth.
ARTICLE I - NAME AND DEFINITIONS
--------- --------------------
Section 1.1 NAME AND PRINCIPAL OFFICE. This Trust shall be known as "Global
Lending Trust" and the Trustees shall conduct the business of the Trust under
that name or any other name or names as they may from time to time determine.
The principal office of the Trust shall be located at Exchange Place, 25th
Floor, Boston, Massachusetts 02109 or at such other location as the Trustees may
from time to time determine.
Section 1.2 DEFINITIONS. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time;
(b) "class" refers to any class of Shares of any Series or Sub-Trust
established and designated under or in accordance with the provisions of Article
IV;
(c) "Commission" shall have the meaning given it in the 1940 Act;
<PAGE> 6
(d) "Declaration of Trust" shall mean this Agreement and Declaration
of Trust as amended or restated from time to time;
(e) "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(f) "Shareholder" means a record owner of Shares;
(g) "Shares" refers to the transferable units of interest into which
the beneficial interest in the Trust and each Sub-Trust of the Trust and/or any
class of any Sub-Trust (as the context may require) shall be divided from time
to time;
(h) "Sub-Trust" or "Series" refers to a series of Shares established
and designated under or in accordance with the provisions of Article IV;
(i) "Trust" refers to the Massachusetts business trust established by
this Declaration of Trust, as amended from time to time, inclusive of each and
every Sub-Trust established hereunder; and
(j) "Trustees" refers to the Trustees of the Trust and of each
Sub-Trust hereunder named herein or elected in accordance with Article III.
ARTICLE II - PURPOSE OF TRUST
---------- ----------------
The purpose of the Trust is to operate as an investment company and to
offer Shareholders of the Trust and each Sub-Trust of the Trust one or more
investment programs primarily in securities and debt instruments.
ARTICLE III - THE TRUSTEES
----------- ------------
Section 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) TRUSTEES. The initial Trustee hereof and of each Sub-Trust
hereunder shall be Raymond P. Boulanger, 8 Glen Road, Winchester, Massachusetts
01890.
(b) NUMBER. The Trustees serving as such, whether named above or
hereafter becoming Trustees, may increase or decrease the number of Trustees to
a number other than the number theretofore determined. No decrease in the number
of Trustees shall have the effect of removing any Trustee from office prior to
the expiration of such Trustee's term, but the number of Trustees may be
decreased in conjunction with the removal of a Trustee pursuant to subsection
(e) of this Section 3.1.
2
<PAGE> 7
(c) ELECTION AND TERM. Trustees in addition to those named herein may
become such by election by Shareholders or the Trustees in office pursuant to
Section 3.1(f). Each Trustee, whether named above or hereafter becoming a
Trustee, shall serve as a Trustee of the Trust and of each Sub-Trust hereunder
during the lifetime of this Trust and until its termination as hereinafter
provided except as such Trustee sooner dies, resigns, retires or is removed.
Subject to Section 16(a) of the 1940 Act, the Trustees may elect their own
successors and may, pursuant to Section 3.1(f) hereof, appoint Trustees to fill
vacancies.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign or retire as a
Trustee, by written instrument signed by such Trustee and delivered to the other
Trustees or to any officer of the Trust, and such resignation or retirement
shall take effect upon such delivery or upon such later date as is specified in
such instrument and shall be effective as to the Trust and each Sub-Trust
hereunder.
(e) REMOVAL. Any Trustee may be removed with or without cause at any
time: (i) by written instrument, signed by at least two-thirds of the number of
Trustees in office immediately prior to such removal, specifying the date upon
which such removal shall become effective; or (ii) by vote of Shareholders
holding not less than two-thirds of the Shares then outstanding, cast in person
or by proxy at any meeting called for the purpose; or (iii) by a written
declaration signed by Shareholders holding not less than two-thirds of the
Shares then outstanding and filed with the Trust's custodian. Any such removal
shall be effective as to the Trust and each Sub-Trust hereunder.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation, retirement, removal
or incapacity of any of the Trustees, or resulting from an increase in the
number of Trustees by the other Trustees may (but so long as there are at least
two remaining Trustees, need not unless required by the 1940 Act) be filled by a
majority of the remaining Trustees, subject to the provisions of Section 16(a)
of the 1940 Act, through the appointment in writing of such other person as such
remaining Trustees in their discretion shall determine and such appointment
shall be effective upon the written acceptance of the person named therein to
serve as a Trustee and agreement by such person to be bound by the provisions of
this Declaration of Trust, except that any such appointment in anticipation of a
vacancy to occur by reason of retirement, resignation or increase in number of
Trustees to be effective at a later date shall become effective only at or after
the effective date of said retirement, resignation or increase in number of
Trustees. As soon as any Trustee so appointed shall have accepted such
appointment and shall have agreed in writing to be bound by this Declaration of
Trust and the appointment is effective, the Trust estate shall vest in the new
Trustee, together with the continuing Trustees, without any further act or
conveyance.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul or terminate the Trust or any Sub-Trust hereunder or to revoke
or terminate any existing agency or contract created or entered into pursuant to
the terms of this Declaration of Trust.
3
<PAGE> 8
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act or
under circumstances which would justify removal for cause, no person ceasing to
be a Trustee as a result of death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such cessation.
Section 3.2 POWERS OF TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. The Trustees in all instances
shall act as principals, and are and shall be free from the control of the
Shareholders. The Trustees shall have full power and authority to do any and all
acts and to make and execute any and all contracts and instruments that they may
consider necessary or appropriate in connection with the management of the
Trust. The Trustees shall not be bound or limited by present or future laws or
customs with regard to investment by trustees or fiduciaries, but shall have
full authority and absolute power and control over the assets of the Trust and
the business of the Trust to the same extent as if the Trustees were the sole
owners of the assets of the Trust and the business in their own right, including
such authority, power and control to do all acts and things as they, in their
uncontrolled discretion, shall deem proper to accomplish the purposes of this
Trust. Without limiting the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the conduct of the
business and affairs of the Trust and may amend and repeal them to the extent
that such By-Laws do not reserve that right to the Shareholders; they may sue or
be sued in the name of the Trust; they may from time to time in accordance with
the provisions of Section 4.1 hereof establish Sub-Trusts, each such Sub-Trust
to operate as a separate and distinct investment medium and with separately
defined investment objectives and policies and distinct investment purposes;
they may from time to time in accordance with the provisions of Section 4.1
hereof establish classes of Shares of any Series or Sub-Trust or divide the
Shares of any Series or Sub-Trust into classes; they may as they consider
appropriate elect and remove officers and appoint and terminate agents and
consultants and hire and terminate employees, any one or more of the foregoing
of whom may be a Trustee, and may provide for the compensation of all of the
foregoing; they may appoint from their own number, and terminate, any one or
more committees consisting of two or more Trustees, including without implied
limitation an executive committee, which may, when the Trustees are not in
session and subject to the 1940 Act, exercise some or all of the power and
authority of the Trustees as the Trustees may determine; in accordance with
Section 3.3 they may employ one or more advisers, administrators, depositories
and custodians and may authorize any depository or custodian to employ
subcustodians or agents and to deposit all or any part of such assets in a
system or systems for the central handling of securities and debt instruments,
retain transfer, dividend, accounting or Shareholder servicing agents or any of
the foregoing, provide for the distribution of Shares by the Trust through one
or more distributors, principal underwriters or otherwise, and set record dates
or times for the determination of Shareholders or various of them with respect
to various matters; they may compensate or provide for the compensation of the
Trustees, officers, advisers, administrators, custodians, other agents,
consultants and employees of the Trust or the Trustees on such terms as they
deem appropriate; and in general they may delegate to any officer of the Trust,
to any committee of the Trustees and to any employee, adviser, administrator,
distributor, depository, custodian, transfer and dividend disbursing agent, or
any other agent or consultant of
4
<PAGE> 9
the Trust such authority, powers, functions and duties as they consider
desirable or appropriate for the conduct of the business and affairs of the
Trust, including without implied limitation, the power and authority to act in
the name of the Trust and any Sub-Trust and of the Trustees, to sign documents
and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with the
1940 Act or other applicable law, the Trustees shall have power and authority
for and on behalf of the Trust and each separate Sub-Trust established
hereunder:
(a) INVESTMENTS. To invest and reinvest cash and other property, and
to hold cash or other property uninvested without in any event being bound or
limited by any present or future law or custom in regard to investments by
trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any rights
of ownership, with respect to stock or other securities, debt instruments or
property; and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities, debt instruments
or property as the Trustees shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or debt
instruments;
(e) FORM OF HOLDING. To hold any security, debt instrument or property
in a form not indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust or of any
Sub-Trust or in the name of a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any plan for
the reorganization, consolidation or merger of any corporation or issuer, any
security or debt instrument of which is or was held in the Trust; to consent to
any contract, lease, mortgage, purchase or sale of property by such corporation
or issuer, and to pay calls or subscriptions with respect to any security or
debt instrument held in the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any securities
or debt instruments in acting through a committee, depositary, voting trustee or
otherwise, and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
5
<PAGE> 10
(h) COMPROMISE. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any Sub-Trust or any matter in controversy,
including but not limited to claims for taxes;
(i) PARTNERSHIPS, ETC. To enter into joint ventures, general or
limited partnerships and any other combinations or associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage and pledge
the assets of the Trust or any part thereof to secure obligations arising in
connection with such borrowing;
(k) GUARANTEES, ETC. To endorse or guarantee the payment of any notes
or other obligations of any person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof; and to mortgage and pledge
the Trust property or any part thereof to secure any of or all such obligations;
(l) INSURANCE. To purchase and pay for entirely out of Trust property
such insurance and/or bonding as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance policies
insuring the assets of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, consultants, investment advisers,
managers, administrators, distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person in
any such capacity, including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability; and
(m) PENSIONS, ETC. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust.
(n) DISTRIBUTION PLANS. To adopt on behalf of the Trust or any
Sub-Trust with respect to any class thereof a plan of distribution and related
agreements thereto pursuant to the terms of Rule 12b-1 of the 1940 Act and to
make payments from the assets of the Trust or the relevant Sub-Trust or
Sub-Trusts pursuant to said Rule 12b-1 Plan.
Section 3.3 CERTAIN CONTRACTS. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time
6
<PAGE> 11
and without limiting the generality of their powers and authority otherwise set
forth herein, enter into one or more contracts with any one or more
corporations, trusts, associations, partnerships, limited partnerships, other
type of organizations, or individuals (a "Contracting Party"), to provide for
the performance and assumption of some or all of the following services, duties
and responsibilities to, for or on behalf of the Trust and/or any Sub-Trust,
and/or the Trustees, and to provide for the performance and assumption of such
other services, duties and responsibilities in addition to those set forth below
as the Trustees may determine appropriate:
(a) ADVISORY. Subject to the general supervision of the Trustees and
in conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Sub-Trust of the
Trust (as that phrase is defined in subsection (a) of Section 4.2), to manage
such investments and assets, make investment decisions with respect thereto, and
to place purchase and sale orders for portfolio transactions relating to such
investments and assets;
(b) ADMINISTRATION. Subject to the general supervision of the Trustees
and in conformity with any policies of the Trustees with respect to the
operations of the Trust and each Sub-Trust (including each class thereof), to
supervise all or any part of the operations of the Trust and each Sub-Trust, and
to provide all or any part of the administrative and clerical personnel, office
space and office equipment and services appropriate for the efficient
administration and operations of the Trust and each Sub-Trust;
(c) DISTRIBUTION. To distribute the Shares of the Trust and each
Sub-Trust (including any classes thereof), to the principal underwriter of such
Shares, and/or to act as agent of the Trust and each Sub-Trust in the sale of
Shares and the acceptance or rejection of orders for the purchase of Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to maintain
custody of the property of the Trust and each Sub-Trust and accounting records
in connection therewith;
(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain records of
the ownership of outstanding Shares, the issuance and redemption and the
transfer thereof, and to disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) ACCOUNTING. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties, Shareholders
or otherwise.
The same person may be the Contracting Party for some or all of the
services, duties and responsibilities to, for and of the Trust and/or the
Trustees, and the contracts with respect thereto
7
<PAGE> 12
may contain such terms interpretive of or in addition to the delineation of the
services, duties and responsibilities provided for, including provisions that
are not inconsistent with the 1940 Act relating to the standard of duty of and
the rights to indemnification of the Contracting Party and others, as the
Trustees may determine. Nothing herein shall preclude, prevent or limit the
Trust or a Contracting Party from entering into sub-contractual arrangements
relating to any of the matters referred to in Sections 3.3(a) through (g)
hereof.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager, adviser,
principal underwriter or distributor or agent of or for any Contracting Party,
or of or for any parent or affiliate of any Contracting Party or that the
Contracting Party or any parent or affiliate thereof is a Shareholder or has an
interest in the Trust or any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations, trusts,
associations, partnerships, limited partnerships or other organizations, or have
other business or interests, shall not affect the validity of any contract for
the performance and assumption of services, duties and responsibilities to, for
or of the Trust or any Sub-Trust and/or the Trustees or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust, any Sub-Trust or
its Shareholders, provided that in the case of any relationship or interest
referred to in the preceding clause (i) on the part of any Trustee or officer of
the Trust either (x) the material facts as to such relationship or interest have
been disclosed to or are known by the Trustees not having any such relationship
or interest and the contract involved is approved in good faith by a majority of
such Trustees not having any such relationship or interest (even though such
unrelated or disinterested Trustees are less than a quorum of all of the
Trustees), (y) the material facts as to such relationship or interest and as to
the contract have been disclosed to or are known by the Shareholders entitled to
vote thereon and the contract involved is specifically approved in good faith by
vote of the Shareholders, or (z) the specific contract involved is fair to the
Trust as of the time it is authorized, approved or ratified by the Trustees or
by the Shareholders.
Section 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust or any Sub-Trust, or partly out of principal and partly out
of income, and to charge or allocate the same to, between or among such one or
more of the Sub-Trusts and/or one or more classes of Shares thereof that may be
established and designated pursuant to Article IV, as the Trustees deem fair,
all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, any Sub-Trust and/or any class of Shares thereof, or
in connection with the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser, administrator, distributor,
principal underwriter, auditor, counsel, depository, custodian, transfer agent,
dividend disbursing agent, accounting agent, Shareholder servicing agent, and
such other agents, consultants, and
8
<PAGE> 13
independent contractors and such other expenses and charges as the Trustees may
deem necessary or proper to incur. Without limiting the generality of any other
provision hereof, the Trustees shall be entitled to reasonable compensation from
the Trust for their services as Trustees and may fix the amount of such
compensation.
Section 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets of
the Trust and of each Sub-Trust shall at all times be considered as vested in
the Trustees.
Section 3.6 ACTION BY TRUSTEES. Except as otherwise provided by the l940
Act or other applicable law, this Declaration of Trust or the By-Laws, any
action to be taken by the Trustees on behalf of or with respect to the Trust or
any Sub-Trust or class thereof may be taken by a majority of the Trustees
present at a meeting of Trustees (a quorum, consisting of at least one-half of
the Trustees then in office, being present), within or without Massachusetts,
including any meeting held by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at a meeting, or by written consents of a
majority of the Trustees then in office (or such larger or different number as
may be required by the 1940 Act or other applicable law).
ARTICLE IV - SHARES
---------- ------
Section 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all with $.001 par value, but the Trustees shall
have the authority from time to time to issue Shares in one or more Series (each
of which Series of Shares shall represent the beneficial interest in a separate
and distinct Sub-Trust of the Trust, including without limitation each Sub-Trust
specifically established and designated in Section 4.2), as they deem necessary
or desirable. For all purposes under this Declaration of Trust or otherwise,
including, without implied limitation, (i) with respect to the rights of
creditors and (ii) for purposes of interpreting the relevant rights of each
Sub-Trust and the Shareholders of each Sub-Trust, each Sub-Trust established
hereunder shall be deemed to be a separate trust. The Trustees shall have
exclusive power without the requirement of Shareholder approval to establish and
designate such separate and distinct Sub-Trusts, and to fix and determine the
relative rights and preferences as between the shares of the separate Sub-Trusts
as to right of redemption and the price, terms and manner of redemption, special
and relative rights as to dividends and other distributions and on liquidation,
sinking or purchase fund provisions, conversion rights, and conditions under
which the several Sub-Trusts shall have separate voting rights or no voting
rights.
In addition, the Trustees shall have exclusive power, without the
requirement of Shareholder approval, to issue classes of Shares of any Sub-Trust
or divide the Shares of any Sub-Trust into classes, each class having such
different dividend, liquidation, voting and other rights as the Trustees may
determine, and may establish and designate the specific classes of Shares of
each Sub-Trust. The fact that a Sub-Trust shall have initially been established
and designated without any specific establishment or designation of classes
(i.e., that all Shares of such
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<PAGE> 14
Sub-Trust are initially of a single class), or that a Sub-Trust shall have more
than one established and designated class, shall not limit the authority of the
Trustees to establish and designate separate classes, or one or more additional
classes, of said Sub-Trust without approval of the holders of the initial class
thereof, or previously established and designated class or classes thereof.
The number of authorized Shares and the number of Shares of each Sub-Trust
or class thereof that may be issued is unlimited, and the Trustees may issue
Shares of any Sub-Trust or class thereof for such consideration and on such
terms as they may determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the Shareholders. All
Shares when so issued on the terms determined by the Trustees shall be fully
paid and non-assessable (but may be subject to mandatory contribution back to
the Trust as provided in subsection (h) of Section 4.2). The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Sub-Trust or class thereof into one or more Sub-Trusts or
classes thereof that may be established and designated from time to time. The
Trustees may hold as treasury Shares, reissue for such consideration and on such
terms as they may determine, or cancel, at their discretion from time to time,
any Shares of any Sub-Trust or class thereof reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in Section
5.3.
The establishment and designation of any Sub-Trust or of any class of
Shares of any Sub-Trust in addition to those established and designated in
Section 4.2 shall be effective (i) upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation of
the relative rights and preferences of the Shares of such Sub-Trust or class,
(ii) upon the execution of an instrument in writing by an officer of the Trust
pursuant to the vote of a majority of the Trustees, or (iii) as otherwise
provided in either such instrument. At any time that there are no Shares
outstanding of any particular Sub-Trust or class previously established and
designated, the Trustees may by an instrument executed by a majority of their
number (or by an instrument executed by an officer of the Trust pursuant to the
vote of a majority of the Trustees) abolish that Sub-Trust or class and the
establishment and designation thereof. Each instrument establishing and
designating any Sub-Trust shall have the status of an amendment to this
Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of Shares
of any Sub-Trust (including any classes thereof) of the Trust to the same extent
as if such person were not a Trustee, officer or other agent of the Trust; and
the Trust may issue and sell or cause to be issued and sold and may purchase
Shares of any Sub-Trust (including any classes thereof) from any such person or
any such organization subject only to the general limitations, restrictions or
other provisions applicable to the sale or purchase of Shares of such Sub-Trust
(including any classes thereof) generally.
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<PAGE> 15
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SUB-TRUSTS AND CLASSES.
Without limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby establish
and designate three (3) Sub-Trusts: (i) U.S. Government Securities Money Market
Fund, (ii) General Money Market Fund, and (iii) Short-Term Fund, each of which
shall have a single class of Shares. The Shares of such Sub-Trusts and any
Shares of any further Sub-Trust that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise determine with
respect to some further Sub-Trust at the time of establishing and designating
the same) have the following relative rights and preferences:
(a) ASSETS BELONGING TO SUB-TRUSTS. All consideration received by the
Trust for the issue or sale of Shares of a particular Sub-Trust or any classes
thereof, together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall be held by the Trustees in trust for the benefit of
the holders of Shares of that Sub-Trust or class thereof and shall irrevocably
belong to that Sub-Trust (and be allocable to any classes thereof) for all
purposes, and shall be so recorded upon the books of account of the Trust. Such
consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, together with any General Items (as
hereinafter defined) allocated to that Sub-Trust as provided in the following
sentence, are herein referred to as "assets belonging to" that Sub-Trust (and
allocable to any classes thereof). In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular Sub-Trust (collectively
"General Items"), the Trustees shall allocate such General Items to and among
any one or more of the Sub-Trusts established and designated from time to time
in such manner and on such basis as they, in their sole discretion, deem fair
and equitable; and any General Items so allocated to a particular Sub-Trust
shall belong to that Sub-Trust (and be allocable to any classes thereof). Each
such allocation by the Trustees shall be conclusive and binding upon the holders
of all Shares of all Sub-Trusts (including any classes thereof) for all
purposes.
(b) LIABILITIES BELONGING TO SUB-TRUSTS. The assets belonging to each
particular Sub-Trust shall be charged with the liabilities in respect of that
Sub-Trust and all expenses, costs, charges and reserves belonging to that
Sub-Trust, and any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Sub-Trust shall be allocated and charged by the Trustees to and among any one
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<PAGE> 16
or more of the Sub-Trusts established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem fair and
equitable. In addition, the liabilities in respect of a particular class of
Shares of a particular Sub-Trust and all expenses, costs, charges and reserves
belonging to that class of Shares, and any general liabilities, expenses, costs,
charges or reserves of that particular Sub-Trust which are not readily
identifiable as belonging to any particular class of Shares of that Sub-Trust
shall be allocated and charged by the Trustees to and among any one or more of
the classes of Shares of that Sub-Trust established and designated from time to
time in such manner and on such basis as the Trustees in their sole discretion
deem fair and equitable. The liabilities, expenses, costs, charges and reserves
allocated and so charged to a Sub-Trust or class thereof are herein referred to
as "liabilities belonging to" that Sub-Trust or class thereof. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders, creditors and any other persons
dealing with the Trust or any Sub-Trust (including any classes thereof) for all
purposes. Any creditor of any Sub-Trust may look only to the assets of that
Sub-Trust to satisfy such creditor's debt.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders.
(c) DIVIDENDS. Dividends and distributions on Shares of a particular
Sub-Trust or any class thereof may be paid with such frequency as the Trustees
may determine, which may be daily or otherwise pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Sub-Trust or class, from such of the
income and capital gains, accrued or realized, from the assets belonging to that
Sub-Trust, or in the case of a class, belonging to that Sub-Trust and allocable
to that class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Sub-Trust or class. All dividends and
distributions on Shares of a particular Sub-Trust or class thereof shall be
distributed pro rata to the holders of Shares of that Sub-Trust or class in
proportion to the number of Shares of that Sub-Trust or class held by such
holders at the date and time of record established for the payment of such
dividends or distributions, except that in connection with any dividend or
distribution program or procedure the Trustees may determine that no dividend or
distribution shall be payable on Shares as to which the Shareholder's purchase
order and/or payment have not been received by the time or times established by
the Trustees under such program or procedure. Such dividends and distributions
may be made in cash or Shares of that Sub-Trust or class or a combination
thereof as determined by the Trustees or pursuant to any program that the
Trustees may have in effect at the time for the election by each Shareholder of
the mode of the making of such dividend or distribution to that Shareholder. Any
such dividend or distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with subsection (h) of Section 4.2.
The Trustees shall have full discretion to determine which items shall be
treated as income and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
(d) LIQUIDATION. In the event of the liquidation or dissolution of the
Trust, the holders of Shares of each Sub-Trust or any class thereof that has
been established and designated shall be entitled to receive, when and as
declared by the Trustees, the excess of the assets belonging to that Sub-Trust,
or in the case of a class, belonging to that Sub-Trust and allocable to that
class, over the liabilities belonging to that Sub-Trust or class. The assets so
distributable to the holders of Shares of any particular Sub-Trust or class
thereof shall be distributed among
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<PAGE> 17
such holders in proportion to the number of Shares of that Sub-Trust or class
thereof held by them and recorded on the books of the Trust. The liquidation of
any particular Sub-Trust or class thereof may be authorized at any time by vote
of a majority of the Trustees then in office.
(e) VOTING. On each matter submitted to a vote of the Shareholders,
each holder of a Share shall be entitled to one vote for each whole Share
standing in such Shareholder's name on the books of the Trust irrespective of
the Series thereof or class thereof and all Shares of all Series and classes
thereof shall vote together as a single class; provided, however, that as to any
matter (i) with respect to which a separate vote of one or more Series or
classes thereof is required by the 1940 Act or the provisions of the writing
establishing and designating the Sub-Trust or class, such requirements as to a
separate vote by such Series or class thereof shall apply in lieu of all Shares
of all Series and classes thereof voting together; and (ii) as to any matter
which affects the interests of one or more particular Series or classes thereof,
only the holders of Shares of the one or more affected Series or classes shall
be entitled to vote, and each such Series or class shall vote as a separate
class.
(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular
Sub-Trust or any class thereof shall have the right at such times as may be
permitted by the Trust to require the Trust to redeem all or any part of such
holder's Shares of that Sub-Trust or class thereof at a redemption price equal
to the net asset value per Share of that Sub-Trust or class thereof next
determined in accordance with subsection (h) of this Section 4.2 after the
Shares are properly tendered for redemption, subject to any contingent deferred
sales charge or redemption charge in effect at the time of redemption. Payment
of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may,
subject to the requirements of the 1940 Act, make payment wholly or partly in
securities or other assets belonging to the Sub-Trust of which the Shares being
redeemed are part at the value of such securities or assets used in such
determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
Sub-Trust or class thereof to require the Trust to redeem Shares of that
Sub-Trust during any period or at any time when and to the extent permissible
under the 1940 Act.
(g) REDEMPTION BY TRUST. Each Share of each Sub-Trust or class thereof
that has been established and designated is subject to redemption by the Trust
at the redemption price which would be applicable if such Share was then being
redeemed by the Shareholder pursuant to subsection (f) of this Section 4.2: (i)
at any time, if the Trustees determine in their sole discretion and by majority
vote that failure to so redeem may have materially adverse consequences to the
Trust or any Sub-Trust or to the holders of the Shares of the Trust or any
Sub-Trust thereof or class thereof, or (ii) upon such other conditions as may
from time to time be determined by the Trustees and set forth in the then
current Prospectus of the Trust. Upon such redemption the holders of the Shares
so redeemed shall have no further right with respect thereto other than to
receive payment of such redemption price.
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(h) NET ASSET VALUE. The net asset value per Share of any Sub-Trust
shall be (i) in the case of a Sub-Trust whose Shares are not divided into
classes, the quotient obtained by dividing the value of the net assets of that
Sub-Trust (being the value of the assets belonging to that Sub-Trust less the
liabilities belonging to that Sub-Trust) by the total number of Shares of that
Sub-Trust outstanding, and (ii) in the case of a class of Shares of a Sub-Trust
whose Shares are divided into classes, the quotient obtained by dividing the
value of the net assets of that Sub-Trust allocable to such class (being the
value of the assets belonging to that Sub-Trust allocable to such class less the
liabilities belonging to such class) by the total number of Shares of such class
outstanding; all determined in accordance with the methods and procedures,
including without limitation those with respect to rounding, established by the
Trustees from time to time.
The Trustees may determine to maintain the net asset value per Share of any
Sub-Trust at a designated constant dollar amount and in connection therewith may
adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Sub-Trust as dividends payable in
additional Shares of that Sub-Trust at the designated constant dollar amount and
for the handling of any losses attributable to that Sub-Trust. Such procedures
may provide that in the event of any loss each Shareholder shall be deemed to
have contributed to the capital of the Trust attributable to that Sub-Trust such
Shareholder's pro rata portion of the total number of Shares required to be
cancelled in order to permit the net asset value per Share of that Sub-Trust to
be maintained, after reflecting such loss, at the designated constant dollar
amount. Each Shareholder of the Trust shall be deemed to have agreed, by making
an investment in any Sub-Trust with respect to which the Trustees shall have
adopted any such procedure, to make the contribution referred to in the
preceding sentence in the event of any such loss.
(i) TRANSFER. All Shares of each particular Sub-Trust or class thereof
shall be transferable, but transfers of Shares of a particular Sub-Trust or
class thereof will be recorded on the Share transfer records of the Trust
applicable to that Sub-Trust or class only at such times as Shareholders shall
have the right to require the Trust to redeem Shares of that Sub-Trust or class
and at such other times as may be permitted by the Trustees.
(j) EQUALITY. Except as provided herein or in the instrument
designating and establishing any class of Shares or any Sub-Trust, all Shares of
each particular Sub-Trust or class thereof shall represent an equal
proportionate interest in the assets belonging to that Sub-Trust, or in the case
of a class, belonging to that Sub-Trust and allocable to that class, subject to
the liabilities belonging to that Sub-Trust or class, and each Share of any
particular Sub-Trust or class shall be equal to each other Share of that
Sub-Trust or class; but the provisions of this sentence shall not restrict any
distinctions permissible under subsection (c) of this Section 4.2 that may exist
with respect to dividends and distributions on Shares of the same Sub-Trust or
class. The Trustees may from time to time divide or combine the Shares of any
particular Sub-Trust or class into a greater or lesser number of Shares of that
Sub-Trust or class without thereby changing the proportionate beneficial
interest in the assets belonging to that Sub-Trust or class or in any way
affecting the rights of Shares of any other Sub-Trust or class.
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(k) FRACTIONS. Any fractional Share of any Sub-Trust or class, if any
such fractional Share is outstanding, shall carry proportionately all the rights
and obligations of a whole Share of that Sub-Trust or class, including rights
and obligations with respect to voting, receipt of dividends and distributions,
redemption of Shares, and liquidation of the Trust.
(l) CONVERSION RIGHTS. Subject to compliance with the requirements of
the 1940 Act, the Trustees shall have the authority to provide that holders of
Shares of any Sub-Trust or class thereof shall have the right to convert said
Shares into Shares of one or more other Sub-Trust or class thereof in accordance
with such requirements and procedures as may be established by the Trustees.
(m) CLASS DIFFERENCES. The relative rights and preferences of the
classes of any Sub-Trust may differ in such other respects as the Trustees may
determine to be appropriate in their sole discretion, provided that such
differences are set forth in the instrument establishing and designating such
classes and executed by a majority of the Trustees (or by an instrument executed
by an officer of the Trust pursuant to a vote of a majority of the Trustees).
Section 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded
on the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Sub-Trust and each
class thereof that has been established and designated. No certificates
certifying the ownership of Shares need be issued except as the Trustees may
otherwise determine from time to time. The Trustees may make such rules as they
consider appropriate for the issuance of Share certificates, the use of
facsimile signatures, the transfer of Shares and similar matters. The record
books of the Trust as kept by the Trust or any transfer or similar agent, as the
case may be, shall be conclusive as to who are the Shareholders and as to the
number of Shares of each Sub-Trust and class thereof held from time to time by
each such Shareholder.
Section 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept or reject
investments in the Trust and each Sub-Trust from such persons and on such terms
and for such consideration, not inconsistent with the provisions of the 1940
Act, as they from time to time authorize or determine. The Trustees may
authorize any distributor, principal underwriter, custodian, transfer agent or
other person to accept orders for the purchase of Shares that conform to such
authorized terms and to reject any purchase orders for Shares whether or not
conforming to such authorized terms.
Section 4.5 NO PRE-EMPTIVE RIGHTS. Shareholders shall have no pre-emptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust or any Sub-Trust.
Section 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder
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during the continuance of the Trust shall not operate to terminate the Trust or
any Sub-Trust thereof nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere against the Trust
or the Trustees, but only to the rights of said decedent under this Trust.
Ownership of Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the Trust property or right to call for a partition or
division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholder, nor except as specifically provided herein to call
upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
Section 4.7 NO APPRAISAL RIGHTS. Shareholders shall have no right to demand
payment for their shares or to any other rights of dissenting shareholders in
the event the Trust participates in any transaction which would give rise to
appraisal or dissenters' rights by a shareholder of a corporation organized
under Chapter 156B of the General Laws of the Commonwealth of Massachusetts, or
otherwise.
ARTICLE V - SHAREHOLDERS' VOTING POWERS AND MEETINGS
--------- ----------------------------------------
Section 5.1 VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election or removal of Trustees as provided in Section 3.1, (ii)
with respect to any contract with a Contracting Party as provided in Section 3.3
as to which Shareholder approval is required by the 1940 Act, (iii) with respect
to any termination or reorganization of the Trust to the extent and as provided
in Sections 7.1 and 7.2, (iv) with respect to any amendment of this Declaration
of Trust to the extent and as provided in Section 7.3, (v) to the same extent as
the stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or any Sub-Trust
thereof or the Shareholders (provided, however, that a Shareholder of a
particular Sub-Trust shall not be entitled to a derivative or class action on
behalf of any other Sub-Trust (or Shareholder of any other Sub-Trust) of the
Trust) and (vi) with respect to such additional matters relating to the Trust as
may be required by the 1940 Act, this Declaration of Trust, the By-Laws or any
registration of the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy. Proxies may be given orally or in writing or pursuant to any
computerized, telephonic, or mechanical data gathering process specifically
approved by the Trustees. A proxy with respect to Shares held in the name of two
or more persons shall be valid if executed by any one of them unless at or prior
to exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the challenger.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required by law, this Declaration of Trust or the
By-Laws to be taken by Shareholders.
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Section 5.2 MEETINGS. No annual or regular meeting of Shareholders is
required. Special meetings of Shareholders may be called by the Trustees from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given by the Trustees by
mailing such notice at least seven days before such meeting, postage prepaid,
stating the time, place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust. The Trustees
shall promptly call and give notice of a meeting of Shareholders for the purpose
of voting upon removal of any Trustee of the Trust when requested to do so in
writing by Shareholders holding not less than 10% of the Shares then
outstanding. If the Trustees shall fail to call or give notice of any meeting of
Shareholders for a period of 30 days after written application by Shareholders
holding at least 10% of the Shares then outstanding requesting a meeting be
called for any other purpose requiring action by the Shareholders as provided
herein or in the By-Laws, then Shareholders holding at least 10% of the Shares
then outstanding may call and give notice of such meeting, and thereupon the
meeting shall be held in the manner provided for herein in case of call thereof
by the Trustees.
Section 5.3 RECORD DATES. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 90 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to be treated as a Shareholder of record
for purposes of such other action, even though such Shareholder has since that
date and time disposed of such Shareholder's Shares, and no Shareholder becoming
such after that date and time shall be so entitled to vote at such meeting or
any adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action.
Section 5.4 QUORUM AND REQUIRED VOTE. Except as otherwise provided by the
1940 Act or other applicable law, thirty percent of the Shares entitled to vote
shall be a quorum for the transaction of business at a Shareholders' meeting,
but any lesser number shall be sufficient for adjournments. Any meeting of
shareholders, whether or not a quorum is present, may be adjourned for any
lawful purpose provided that no meeting shall be adjourned for more than six
months beyond the originally scheduled meeting date. Any adjourned session or
sessions may be held, within a reasonable time after the date set for the
original meeting without the necessity of further notice. A majority of the
Shares voted at a meeting of which a quorum is present shall decide any
questions and a plurality shall elect a Trustee, except when a different vote is
required or permitted by any provision of the 1940 Act or other applicable law
or by this Declaration of Trust or the By-Laws.
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Section 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by the 1940 Act or by
any express provision of this Declaration of Trust or the By-Laws) consent to
the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 5.6 INSPECTION OF RECORDS. The records of the Trust shall be open
to inspection by Shareholders for any lawful purpose reasonably related to a
Shareholder's interest as a Shareholder. The Trustees may from time to time
establish reasonable standards including standards governing what information
and documents are to be furnished, at what time and location and at whose
expense with respect to Shareholder inspection of Trust records to the same
extent as is permitted stockholders of a Massachusetts business corporation
under the Massachusetts Business Corporation Law.
Section 5.7 ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
Section 5.8 SHAREHOLDER COMMUNICATIONS. Whenever ten or more Shareholders
of record who have been such for at least six months preceding the date of
application, and who hold in the aggregate either Shares having a net asset
value of at least $25,000 or at least 1% of the outstanding Shares, whichever is
less, shall apply to the Trustees in writing, stating that they wish to
communicate with other Shareholders with a view to obtaining signatures to a
request for a Shareholder meeting and accompanied by a form of communication and
request which they wish to transmit, the Trustees shall within five business
days after receipt of such application either (1) afford to such applicants
access to a list of the names and addresses of all Shareholders as recorded on
the books of the Trust or Sub-Trust, as applicable; or (2) inform such
applicants as to the approximate number of Shareholders of record, and the
approximate cost of mailing to them the proposed communication and form of
request.
If the Trustees elect to follow the course specified in clause (2) above,
the Trustees, upon the written request of such applicants, accompanied by a
tender of the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all Shareholders of
record at their addresses as recorded on the books, unless within five business
days after such tender the Trustees shall mail to such applicants and file with
the Commission, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Trustees to the effect that in
their opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion. The Trustees shall thereafter comply with any order entered by
the Commission and the requirements of the 1940 Act and the Securities Exchange
Act of 1934.
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ARTICLE VI - LIMITATION OF LIABILITY; INDEMNIFICATION
---------- ----------------------------------------
Section 6.1 TRUSTEES, SHAREHOLDERS, ETC. Not Personally Liable; Notice. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Sub-Trust with which such person
dealt for payment under such credit, contract or claim; and neither the
Shareholders of any Sub-Trust nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, nor any other Sub-Trust
shall be personally liable therefor. Every note, bond, contract, instrument,
certificate or undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust, any Sub-Trust or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have been executed
or done only by or for the Trust (or the Sub-Trust) or the Trustees and not
personally. Nothing in this Declaration of Trust shall protect any Trustee or
officer against any liability to the Trust or the Shareholders to which such
Trustee or officer would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee or of such officer.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of the Commonwealth of
Massachusetts and shall recite to the effect that the same was executed or made
by or on behalf of the Trust or by them as Trustees or Trustee or as officers or
officer and not individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are binding only
upon the assets and property of the Trust, or the particular Sub-Trust in
question, as the case may be, but the omission thereof shall not operate to bind
any Trustees or Trustee or officers or officer or Shareholders or Shareholder
individually.
Section 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretion hereunder shall be
binding upon everyone interested. A Trustee shall be liable for such Trustee's
own willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, adviser, administrator, distributor or principal underwriter,
custodian or transfer, dividend disbursing, Shareholder servicing or accounting
agent of the Trust, nor shall any Trustee be responsible for the act or omission
of any other Trustee; (b) the Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust
and their duties as Trustees, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice;
and (c) in discharging their duties, the Trustees, when acting in good faith,
shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to Section 3.3. The Trustees as such
shall
19
<PAGE> 24
not be required to give any bond or surety or any other security for the
performance of their duties.
Section 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder (or
former Shareholder) of any Sub-Trust of the Trust shall be charged or held to be
personally liable for any obligation or liability of the Trust solely by reason
of being or having been a Shareholder and not because of such Shareholder's acts
or omissions or for some other reason, said Sub-Trust (upon proper and timely
request by the Shareholder) shall assume the defense against such charge and
satisfy any judgment thereon, and the Shareholder or former Shareholder (or such
Shareholder's heirs, executors, administrators or other legal representatives or
in the case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets of said Sub-Trust estate to be
held harmless from and indemnified against all loss and expense arising from
such liability.
Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust shall
indemnify (from the assets of the Sub-Trust or Sub-Trusts in question) each of
its Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise (hereinafter referred to as
a "Covered Person")) against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or with which such person may
be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined that such Covered
Person had acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office (such conduct referred to hereafter as "Disabling Conduct"). A
determination that the Covered Person is entitled to indemnification may be made
by (i) a final decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of evidence
of Disabling Conduct, or (iii) a reasonable determination, based upon a review
of the facts, that the indemnitee was not liable by reason of Disabling Conduct
by (a) a vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Trust as defined in section 2(a)(l9) of the 1940 Act nor parties
to the proceeding, or (b) an independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time by the
Sub-Trust in question in advance of the final disposition of any such action,
suit or proceeding, provided that the Covered Person shall have undertaken to
repay the amounts so paid to the Sub-Trust in question if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article VI and (i) the Covered Person shall have provided security for such
undertaking, (ii) the Trust shall be insured against losses arising by reason of
any lawful advances,
20
<PAGE> 25
or (iii) a majority of a quorum of the disinterested Trustees who are not a
party to the proceeding, or an independent legal counsel in a written opinion,
shall have determined, based on a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
Section 6.5 COMPROMISE PAYMENT. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 6.4,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (a) by a majority of the disinterested
Trustees who are not parties to the proceeding or (b) by an independent legal
counsel in a written opinion. Approval by the Trustees pursuant to clause (a) or
by independent legal counsel pursuant to clause (b) shall not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with any of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction to have been
liable to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article VI, "Covered Person" shall include such person's heirs, executors
and administrators, an "interested Covered Person" is one against whom the
action, suit or other proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened.
Nothing contained in this Article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of any such person.
Section 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII - MISCELLANEOUS
----------- -------------
Section 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated asprovided
herein, the Trust shall continue without limitation of time and, without
limiting the generality of the foregoing, no change, alteration or modification
with respect to any Sub-Trust or class thereof shall operate to terminate the
Trust. The Trust may be terminated at any time by a majority of the Trustees
then in office subject to a favorable vote of a majority of the outstanding
voting securities, as defined in the 1940 Act.
21
<PAGE> 26
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall, in accordance with such procedures
as the Trustees consider appropriate, reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders in conformity with the
provisions of subsection (d) of Section 4.2.
Section 7.2 REORGANIZATION. The Trust, or any one or more Sub-Trusts, may,
either as the successor, survivor, or non-survivor, (1) consolidate or merge
with one or more other trusts, sub-trusts, partnerships, associations or
corporations organized under the laws of the Commonwealth of Massachusetts or
any other state of the United States, to form a consolidated or merged trust,
partnership, limited liability company, association or corporation under the
laws of which any one of the constituent entities is organized with the Trust to
be the survivor or non-survivor of such consolidation or merger, or (2) transfer
a substantial portion of its assets to one or more other trusts, sub-trusts,
partnerships, limited liability companies, associations or corporations
organized under the laws of the Commonwealth of Massachusetts or any other state
of the United States, or have one or more such trusts, sub-trusts, partnerships,
limited liability companies, associations or corporations transfer a substantial
portion of its assets to it, any such consolidation, merger or transfer to be
upon such terms and conditions as are specified in an agreement and plan of
reorganization authorized and approved by the Trustees and entered into by the
Trust, or one or more Sub-Trusts as the case may be, in connection therewith.
Any such consolidation, merger or transfer may be authorized at any time by vote
of a majority of the Trustees then in office.
Section 7.3 AMENDMENTS. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time, so long as such
amendment does not materially adversely affect the rights of any Shareholder
with respect to which such amendment is or purports to be applicable and so long
as such amendment is not in contravention of applicable law, including the 1940
Act, by an instrument in writing signed by a majority of the then Trustees (or
by an officer of the Trust pursuant to the vote of a majority of such Trustees).
Any amendment to this Declaration of Trust that materially adversely affects the
rights of Shareholders may be adopted at any time by an instrument in writing
signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to a vote of a majority of such Trustees) when authorized to do so by
the vote in accordance with subsection (e) of Section 4.2 of Shareholders as
specified in Section 5.4 hereof. Subject to the foregoing, any such amendment
shall be effective as of any prior or future time as provided in the instrument
containing the terms of such amendment or, if there is no provision therein with
respect to effectiveness, upon the execution of such instrument and of a
certificate (which may be a part of such instrument) executed by a Trustee or
officer of the Trust to the effect that such amendment has been duly adopted.
22
<PAGE> 27
Section 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The original or a copy
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. Anyone dealing with the
Trust may rely on a certificate by an officer of the Trust as to whether or not
any such amendments have been made, as to the identities of the Trustees and
officers, and as to any matters in connection with the Trust hereunder; and,
with the same effect as if it were the original, may rely on a copy certified by
an officer of the Trust to be a copy of this instrument or of any such
amendments. In this instrument and in any such amendment, references to this
instrument, and all expressions like "herein," "hereof" and "hereunder" shall be
deemed to refer to this instrument as a whole as the same may be amended or
affected by any such amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
Section 7.5 APPLICABLE LAW. This Declaration of Trust is made in the
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type referred to in Section 1 of Chapter 182 of the
Massachusetts General Laws and of the type commonly called a Massachusetts
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
Section 7.6 INTEGRATION. This Declaration of Trust constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 28
IN WITNESS WHEREOF, the undersigned hereunto has set his hand and seal in
the City of Boston, Commonwealth of Massachusetts, for himself and his assigns,
as of the day and year first above written.
/s/ Raymond P. Boulanger
------------------------------
Raymond P. Boulanger
24
<PAGE> 29
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk County, ss
Then personally appeared before me the within-named Raymond P. Boulanger,
who acknowledged the execution of the foregoing instrument to be his free act
and deed, before me, this 15th day of June, 1995.
/s/ Sandra J. Baldwin
-------------------------------------
Notary Public
[Notarial Seal]
My commission expires: March 28, 1997
--------------
25
<PAGE> 30
GLOBAL LENDING TRUST
AMENDMENT NO. 1 TO MASTER TRUST AGREEMENT
AMENDMENT NO. 1 to the Master Trust Agreement of GLOBAL LENDING TRUST,
dated June 15, 1995, made at Boston, Massachusetts this 26th day of February,
1996 by the sole Trustee hereunder.
WHEREAS, Section 7.3 of the Master Trust Agreement dated June 15, 1995 (the
"Agreement") of GLOBAL LENDING TRUST (the "Trust") provides that the Agreement
may be amended at any time, so long as such amendment does not materially
adversely affect the rights of any shareholder of the Trust and so long as such
amendment is not in contravention of applicable law, including the Investment
Company Act of 1940, as amended, by an instrument in writing signed by a
majority of the Trustees of the Trust; and
WHEREAS, the sole Trustee desires to amend the Agreement to change the name
of the Trust from "Global Lending Trust" to "Navigator Securities Lending
Trust"; and
WHEREAS, the sole Trustee desires to amend the Agreement to change the name
of each portfolio series of the Trust from "U.S. Government Securities Money
Market Fund," "General Money Market Fund" and "Short-Term Fund" to "Navigator
Government Portfolio," "Navigator Prime Portfolio" and "Navigator Short-Term
Bond Portfolio," respectively;
NOW, THEREFORE, the undersigned, being the sole Trustee of the Trust, does
hereby state:
1. Section 1.1 of the Agreement is hereby amended in its entirety to read as
follows:
Section 1.1 NAME AND PRINCIPAL OFFICE. This Trust shall be known as
"Navigator Securities Lending Trust" and the Trustees shall conduct the
business of the Trust under that name or any other name or names as they
may from time to time determine. The principal office of the Trust shall be
located at Exchange Place, 25th Floor, Boston, Massachusetts 02109 or at
such other location as the Trustees may from time to time determine.
2. The first paragraph of Section 4.2 of the Agreement is hereby amended in its
entirety to read as follows:
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SUB-TRUSTS AND CLASSES.
Without limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby
establish and designate three (3) Sub-Trusts: (i) Navigator Government
Portfolio, (ii) Navigator Prime Portfolio, and (iii) Navigator Short-Term
Bond Portfolio, each of which shall have a single class of Shares. The
Shares of such Sub-Trusts and any Shares of any further Sub-Trust that may
from time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with respect to some
<PAGE> 31
further Sub-Trust at the time of establishing and designating the same)
have the following relative rights and preferences:
IN WITNESS WHEREOF, the undersigned hereunto has set his hand in the City
of Boston, Commonwealth of Massachusetts, for himself and his assigns, as of the
26th day of February, 1996.
/s/ Raymond P. Boulanger
-------------------------------------------
Raymond P. Boulanger, as Trustee
2
<PAGE> 1
EXHIBIT 2
---------
<PAGE> 2
AMENDED AND RESTATED BY-LAWS
OF
NAVIGATOR SECURITIES LENDING TRUST
ARTICLE 1
---------
Agreement and Declaration of Trust and Principal Office
-------------------------------------------------------
1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be subject to
the Master Trust Agreement, as from time to time in effect (the "Declaration of
Trust"), of Navigator Securities Lending Trust, the Massachusetts business trust
established by the Declaration of Trust (the "Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust shall
be located in Boston, Massachusetts.
ARTICLE 2
---------
Meetings of Trustees
--------------------
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting when called by the
Chairman of the Trustees, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Secretary
or an Assistant Secretary or by the officer of the Trustees calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special meeting
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at his or her
usual or last known business or residence address or to give notice to him or
her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
2
<PAGE> 3
2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees then
in office shall constitute a quorum. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further notice.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE 3
---------
Officers
--------
3.1 ENUMERATION; QUALIFICATION. The Trustees may, but are not required to,
elect or appoint officers of the Trust. The officers of the Trust, if officers
are elected or appointed, shall be a Chairman of the Trustees, a President, a
Treasurer, a Secretary, Vice Presidents, and Assistant Treasurers, Assistant
Secretaries and Assistant Vice Presidents, if any, as the Trustees from time to
time may in their discretion elect or as appointed from time to time pursuant to
authority delegated by the Trustees. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. The Chairman of the
Trustees shall be a Trustee and may but need not be a shareholder; and any other
officer may be but none need be a Trustee or shareholder. Any two or more
offices may be held by the same person.
3.2 ELECTION. If the Trustees choose to have a Chairman of the Trustees, a
President, a Treasurer, or a Secretary, such officers shall be elected annually
by the Trustees at a meeting held within the first six months of the Trust's
fiscal year. The meeting at which the officers are elected shall be known as the
annual meeting of Trustees. Other officers, if any, may be elected or appointed
by the Trustees at said meeting or at any other time. Vacancies in any office
may be filled at any time.
3.3 TENURE. The Chairman of the Trustees, the President, the Treasurer, and
the Secretary, if elected, shall hold office until the next annual meeting of
the Trustees and until their respective successors are chosen and qualified, or
in each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
3.4 POWERS. Subject to the other provisions of these By-Laws, if officers
are elected or appointed, each officer shall have, in addition to the duties and
powers set forth below in subsections 3.4(a) through 3.4(g) and in the
Declaration of Trust, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may from
time to time designate. If no officers are elected or appointed, agents of the
Trust selected by the Trustees may exercise the duties and powers set forth
below in subsections 3.4(a) through 3.4(g)
3
<PAGE> 4
and in the Declaration of Trust, as well as such duties and powers as are
commonly incident to those offices as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
(a) CHAIRMAN; PRESIDENT. Unless the Trustees otherwise provide, the
Chairman of the Trustees, or, if there is none, or in the absence of the
Chairman, the President shall preside at all meetings of the shareholders and of
the Trustees. The President shall be the chief executive officer.
(b) VICE PRESIDENT. The Vice President, or if there be more than one
Vice President, the Vice Presidents in the order determined by the Trustees (or
if there be no such determination, then in the order of their election) shall in
the absence of the President or in the event of his inability or refusal to act,
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Board of Trustees may from time to time prescribe.
(c) TREASURER. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
(d) ASSISTANT TREASURER. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Trustees
(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Trustees may from time to time prescribe.
(e) SECRETARY. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
(f) ASSISTANT SECRETARY. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Trustees (or
if there be no determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Trustees may from
time to time prescribe.
3
<PAGE> 5
(g) ASSISTANT VICE PRESIDENTS. With respect to each Assistant Vice
President and the Vice President to whom such Assistant Vice President reports,
such Assistant Vice President, or if there be more than one, the Assistant Vice
President reporting to a given Vice President in the order determined by the
Trustees (or if there be no determination, then in the order of their election),
shall, in the absence of such Vice President or in the event of his inability or
refusal to act, perform the duties and exercise the powers of such Vice
President and shall perform such other duties and have such other powers as the
Board of Trustees may from time to time prescribe.
3.5 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the Chairman,
the President or the Secretary or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. The Trustees may remove any officer elected by them with or without cause.
Except to the extent expressly provided in a written agreement with the Trust,
no Trustee or officer resigning and no officer removed shall have any right to
any compensation for any period following his or her resignation or removal, or
any right to damages on account of such removal.
ARTICLE 4
---------
Committees
----------
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number an Executive Committee or other committees
and may delegate thereto some or all of their powers except those which by law,
by the Declaration of Trust, or by these By-Laws may not be delegated. Except as
the Trustees may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these By-Laws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its action to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
ARTICLE 5
---------
Reports
-------
5.1 GENERAL. The Trustees and officers shall render reports at the time and
in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
4
<PAGE> 6
ARTICLE 6
---------
Fiscal Year
-----------
6.1 GENERAL. The fiscal year of the Trust shall be fixed by resolution of
the Trustees.
ARTICLE 7
---------
Seal
----
7.1 GENERAL. The seal of the Trust shall consist of a flat-faced die with
the word "Massachusetts," together with the name of the Trust and the year of
its organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence shall
not impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.
ARTICLE 8
---------
Execution of Papers
-------------------
8.1 General. Except as the -Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees may be signed by the
President, any Vice President, the Treasurer, any Assistant Treasurer, Secretary
or any Assistant Secretary, and need not bear the seal of the Trust. The
Chairman of the Board, President, Treasurer or Secretary may determine which
persons have authority to sign any documents on behalf of the Trust and
establish related policies.
ARTICLE 9
---------
Issuance of Share Certificates
------------------------------
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share certificates
either in limited cases or to all shareholders. In that event, a shareholder may
receive a certificate stating the number of shares owned by him, in such form as
shall be prescribed from time to time by the Trustees. Such certificate shall be
signed by the president or a vice president and by the treasurer
5
<PAGE> 7
or assistant treasurer. Such signatures may be facsimiles if the certificate is
signed by a transfer agent, or by a registrar, other than a Trustee, officer or
employee of the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall cease to be such officer
before such certificate is issued, it may be issued by the Trust with the same
effect as if he were such officer at the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or the
mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. The Trustees may in their
discretion, or the Treasurer may pursuant to authority delegated by the
Trustees, institute a policy of enabling a pledgee of shares transferred as
collateral security to obtain a new certificate if the instrument of transfer
substantially describes the debt or duty that is intended to be secured thereby.
Such new certificate shall express on its face that it is held as collateral
security, and the name of the pledgor shall be stated thereon, who alone shall
be liable as a shareholder, and entitled to vote thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 10
----------
Dealings with Trustees and Officers
-----------------------------------
10.1 GENERAL. Any Trustee, officer or other agent of the Trust may acquire,
own and dispose of shares of the Trust to the same extent as if he were not a
Trustee, officer or agent; and the Trustees may accept subscriptions to shares
or repurchase shares from any firm or company in which any Trustee, officer or
other agent of the Trust may have an interest.
ARTICLE 11
----------
Amendments to the By-Laws
-------------------------
11.1 GENERAL. These By-Laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
Adopted: February 26, 1996
6
<PAGE> 1
EXHIBIT 5
---------
<PAGE> 2
INVESTMENT ADVISORY AGREEMENT
BETWEEN
STATE STREET BANK AND TRUST COMPANY
AND
NAVIGATOR SECURITIES LENDING TRUST
This Agreement is made as of this 4th day of March, 1996, between Navigator
Securities Lending Trust, a Massachusetts business trust (the "Investment
Company"), and State Street Bank and Trust Company, a Massachusetts bank (the
"Adviser").
WHEREAS, the Investment Company is an open-end, diversified management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), currently consisting of three portfolio series, the
Navigator Government Portfolio, the Navigator Prime Portfolio and the Navigator
Short-Term Bond Portfolio (the "Initial Funds"), having their own investment
policies; and
WHEREAS, State Street Bank and Trust Company ("State Street") is a
Massachusetts bank, and is in the business of providing, among other things,
fiduciary and investment advisory services; and
WHEREAS, the Investment Company desires to retain the Adviser to render
investment advisory services to the Investment Company with respect to the
Initial Funds and possibly such other funds (the "Additional Funds") as the
Investment Company and the Adviser may agree upon (each Initial Fund and
Additional Fund being referred to herein as a "Fund" and collectively as the
"Funds"), and the Adviser is willing to render such services;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the Investment Company and Adviser agree as follows:
1. APPOINTMENT OF ADVISER.
(a) INITIAL FUNDS: The Investment Company hereby appoints the Adviser
to act as investment adviser to the Initial Funds for the period and on the
terms set forth in this Agreement. The Adviser accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided. The Investment Company warrants that the Adviser has been duly
appointed to act hereunder.
(b) ADDITIONAL FUNDS: In the event that the Investment Company
establishes one or more Additional Funds with respect to which it desires to
retain the Adviser to render investment advisory services hereunder, it shall so
notify the Adviser in writing, indicating the advisory fee to be payable with
respect to the Additional Fund. If the Adviser is willing to render such
services, it shall so notify the Investment Company in writing, whereupon such
Additional Fund shall become a Fund hereunder. In such
<PAGE> 3
event, a writing signed by both the Investment Company and the Adviser shall be
annexed hereto as a part hereof indicating that such Additional Fund has become
a Fund hereunder and reflecting the agreed-upon fee schedule for such Fund.
2. ADVISORY DUTIES. Subject to the supervision of the Board of Trustees of
the Investment Company, the Adviser shall manage the investment operations and
the composition of the Funds, including the purchase, retention and disposition
thereof, in accordance with each Fund's investment objective and policies as
stated in the Investment Company's Registration Statement. The Adviser is
authorized to engage one or more sub-advisers in connection with the Adviser's
duties under this Agreement, which sub-advisers may be affiliates of the
Manager. The Adviser's duties hereunder are subject to the following
understandings:
(a) The Adviser shall provide supervision of investments, furnish a
continuous investment program for each Fund, determine from time to time what
investments or Securities will be purchased, retained or sold by each Fund, and
what portion of the assets will be invested or held uninvested as cash;
(b) The Adviser, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Master Trust Agreement,
By-Laws and Registration Statement of the Investment Company and with the
instructions and directions of the Board of Trustees of the Investment Company,
provided, however, the Adviser shall not be responsible for acting contrary to
any of the foregoing that are changed without notice of such change to the
Adviser; and the Adviser shall conform to and comply with the applicable
requirements of the 1940 Act and all other applicable federal or state laws and
regulations.
(c) The Adviser shall promptly communicate to the officers and
Trustees of the Investment Company such information relating to Fund
transactions as they may reasonably request. On occasions when the Adviser deems
the purchase or sale of a security to be in the best interest of a Fund as well
as other clients, the Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be sold or purchased, provided
that, in the opinion of the Adviser, all accounts are treated equitably and
fairly. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, shall be made by the Adviser
in the manner it considers to be the most equitable and consistent with its
fiduciary obligations to the Investment Company and to such other clients.
(d) The Adviser shall maintain books and records with respect to the
Investment Company's securities transactions and shall render to the Investment
Company's Board of Trustees such periodic and special reports as the Board may
reasonably request.
2
<PAGE> 4
(e) The Adviser shall provide the Investment Company with a list of
all securities transactions as reasonably requested by the Investment Company.
(f) The investment advisory services of the Adviser to the Investment
Company under this Agreement are not to be deemed exclusive, and the Adviser
shall be free to render similar services to others.
3. EXECUTION AND ALLOCATION OF PORTFOLIO BROKERAGE COMMISSION. The Adviser,
subject to and in accordance with any directions which the Investment Company's
Board of Trustees may issue from time to time, shall place, in the name of the
Investment Company, orders for the execution of the securities transactions in
which any Fund is authorized to invest. When placing such orders, the primary
objective of the Adviser shall be to obtain the best net price and execution for
the Investment Company, but this requirement shall not be deemed to obligate the
Adviser to place any order solely on the basis of obtaining the lowest
commission rate if the other standards set forth in this section have been
satisfied. The Investment Company recognizes that there are likely to be many
cases in which different brokers are equally able to provide such best price and
execution and that, in selecting among such brokers with respect to particular
trades, it is desirable to choose those brokers who furnish brokerage and
research services (as defined in Section 28(e)(3) of the Securities and Exchange
Act of 1934) or statistical quotations and other information to the Investment
Company and/or the Adviser in accordance with the standards set forth below.
Moreover, to the extent that it continues to be lawful to do so and so long as
the Board determines as a matter of general policy that the Investment Company
will benefit, directly or indirectly, by doing so, the Adviser may place orders
with a broker who charges a commission for that transaction which is in excess
of the amount of commission that another broker would have charged for effecting
that transaction, provided that the excess commission is reasonable in relation
to the value of brokerage and research services provided by that broker.
Accordingly, the Investment Company and the Adviser agree that the Adviser shall
select brokers for the execution of any Fund's securities transactions from
among:
(a) Those brokers and dealers who provide brokerage and research
services, or statistical quotations and other information to the Investment
Company, specifically including the quotations necessary to determine the
Investment Company's net assets, in such amount of total brokerage as may
reasonably be required in light of such services.
(b) Those brokers and dealers who supply brokerage and research
services to the Adviser and/or its affiliated corporations which relate directly
to portfolio securities, actual or potential, of the Investment Company, or
which place the Adviser in a better position to make decisions in connection
with the management of the Investment Company's assets, whether or not such data
may also be useful to the Adviser and its
3
<PAGE> 5
affiliates in managing other portfolios or advising other clients, in such
amount of total brokerage as may reasonably be required.
The Adviser agrees that no investment decision will be made or influenced
by a desire to provide brokerage for allocation in accordance with the
foregoing, and that the right to make such allocation of brokerage shall not
interfere with the Adviser's primary duty to obtain the best net price and
execution for the Investment Company.
4. BOOKS AND RECORDS. The Adviser shall keep the Investment Company's books
and records required to be maintained by it pursuant to paragraph 2(d) hereof.
The Adviser agrees that all records which it maintains for the Investment
Company are the property of the Investment Company and it shall surrender
promptly to the Investment Company any of such records upon the Investment
Company's request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 of the Commission under the 1940 Act any such records
as are required to be maintained by Rule 31a-1(f) of the Commission under the
1940 Act. Nothing herein shall prevent the Adviser from maintaining its own
records as required by law, which may be a duplication of the Investment
Company's records.
5. REPORTS TO ADVISER. The Investment Company agrees to furnish the Adviser
at its principal office all prospectuses, proxy statements, reports to
stockholders, sales literature or other material prepared for distribution to
shareholders of the Investment Company or the public, which refer in any way to
the Adviser, ten (10) days prior to use thereof and not to use such material if
the Adviser should object thereto in writing within seven (7) days after receipt
of such material; provided, however, that the Adviser hereby approves all uses
of its name which merely refer in accurate terms to its appointment as
investment adviser hereunder, which merely identifies the Investment Company, or
which are required by the Securities and Exchange Commission or a state
securities commission. In the event of termination of this Agreement, the
Investment Company shall, on written request of the Adviser, forthwith delete
any reference to the Adviser from any materials described in the preceding
sentence. The Investment Company shall furnish or otherwise make available to
the Adviser such other information relating to the business affairs of the
Investment Company as the Adviser at any time, or from time to time, reasonably
requests in order to discharge its obligations hereunder.
6. PROXIES. Unless the Investment Company gives written instructions to the
contrary, the Adviser shall vote or not vote all proxies solicited by or with
respect to the issuers of securities in which assets of any Fund may be
invested. The Adviser shall use its best good faith judgment to vote or not vote
such proxies in a manner which best serves the interests of the Investment
Company's shareholders.
4
<PAGE> 6
7. EXPENSES. During the term of this Agreement, the Adviser shall pay all
of its own expenses incurred by it in connection with its activities under this
Agreement and each Fund of the Investment Company shall bear all expenses that
are incurred in its operations not specifically assumed by the Adviser.
Expenses borne by a Fund will include but not be limited to the following
(or the Fund's proportionate share of the following): (a) brokerage commissions
relating to securities purchased or sold by the Fund or any losses incurred in
connection therewith; (b) fees payable to and expenses incurred on behalf of the
Fund by the Investment Company's administrator; (c) expenses of organizing the
Investment Company and the Fund; (d) filing fees and expenses relating to the
registration and qualification of the Fund's shares and the Investment Company
under federal or state securities laws and maintaining such registrations and
qualifications; (e) fees and salaries payable to the Investment Company's
Trustees and officers who are not officers or employees of the Investment
Company's administrator, any investment adviser or underwriter of the Investment
Company; (f) taxes (including any income or franchise taxes) and governmental
fees; (g) costs of any liability, uncollectible items of deposit and other
insurance or fidelity bonds; (h) any costs, expenses or losses arising out of
any liability of or claim for damage or other relief asserted against the
Investment Company or the Fund for violation of any law; (i) legal, accounting
and auditing expenses, including legal fees of special counsel for the
independent Trustees; (j) charges of custodians, transfer agents and other
agents; (k) costs of preparing share certificates (if any); (1) expenses of
setting in type and printing Prospectuses and Statements of Additional
Information and supplements thereto for existing shareholders, reports and
statements to shareholders and proxy material; (m) any extraordinary expenses
(including fees and disbursements of counsel) incurred by the Investment Company
or the Fund; and (n) fees and other expenses incurred in connection with
membership in investment company organizations.
8. COMPENSATION OF THE ADVISER. For the services to be rendered by the
Adviser as provided in this Agreement, the Investment Company shall pay to the
Adviser such compensation as is designated in Exhibit A to this Agreement, so
long as the Adviser has not waived all or a portion of such compensation.
9. LIMITATION OF ADVISER'S LIABILITY. In the absence of (a) willful
misfeasance, bad faith or gross negligence on the part of the Adviser in
performance of its obligations and duties hereunder, (b) reckless disregard by
the Adviser of its obligations and duties hereunder, or (c) a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services (in which case, any award of damages shall be limited to the period and
the amount set forth in Section 36(b)(3) of the 1940 Act), the Adviser shall not
be subject to any liability whatsoever to the Investment Company, or to any
shareholder of the Investment Company, for any error of judgment, mistake of law
or
5
<PAGE> 7
any other act or omission in the course of, or connected with, rendering
services hereunder including, without limitation, for any losses that may be
sustained in connection with the purchase, holding, redemption or sale of any
security on behalf of the Investment Company.
10. DURATION AND TERMINATION.
(a) This Agreement shall become effective with respect to the Initial
Funds on the date hereof and, with respect to each Additional Fund, on the date
agreed to by the Adviser and the Investment Company so long as, with respect to
any Additional Fund, the provisions of Section 1(b) have been complied with.
This Agreement, unless sooner terminated as provided herein, shall continue for
each Fund for two years following the effective date of this Agreement with
respect to the Fund, or the date of the first annual or special meeting of the
shareholders of the Fund following such effective date, if approved by a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act), and thereafter shall continue automatically for periods of one year
so long as such continuance is specifically approved at least annually (a) by
the vote of a majority of those members of the Board of Trustees of the
Investment Company who are not parties to this Agreement or "interested persons"
(as defined in the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting such approval, and (b) by the Board of Trustees
of the Investment Company or by vote of a majority of the outstanding voting
securities of the Fund.
(b) This Agreement may be terminated by the Investment Company at any
time, without the payment of any penalty, by vote of a majority of those members
of the Board of Trustees who are not "interested persons" (as defined in the
1940 Act) of the Adviser or the Investment Company or by the majority vote of
either the entire Board of Trustees of the Investment Company or by vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to the Adviser. This Agreement may also be terminated by the Adviser on
90 days' written notice to the Investment Company. This Agreement will
automatically and immediately terminate in the event of its assignment (as
defined in the 1940 Act).
11. CHOICE OF LAW. This Agreement shall be construed in accordance with the
laws of the Commonwealth of Massachusetts and any applicable federal law.
12. LIMITATION OF LIABILITY. The Master Trust Agreement dated June 15,
1995, as amended from time to time, establishing the Investment Company, which
is hereby referred to and a copy of which is on file with the Secretary of The
Commonwealth of Massachusetts, provides that the name Navigator Securities
Lending Trust means the Trustees from time to time serving (as Trustees but not
personally) under said Master Trust Agreement. It is expressly acknowledged and
agreed that the obligations of the Investment Company hereunder shall not be
binding upon any of the Shareholders,
6
<PAGE> 8
Trustees, officers, employees or agents of the Investment Company, personally,
but shall bind only the trust property of the Investment Company, as provided in
its Master Trust Agreement. The execution and delivery of this Agreement have
been authorized by the Trustees of the Investment Company and signed by an
officer of the Investment Company, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Investment Company as provided in its Master Trust Agreement.
IN WITNESS WHEREOF, the due execution hereof as of the date first above written.
Attest: /s/ Michelle McKenzie NAVIGATOR SECURITIES
LENDING TRUST
By: /s/ M. Bradley Jacobs
----------------------------
M. Bradley Jacobs
Attorney-in-fact
Attest: /s/ Sharon L. D'Alessandro STATE STREET BANK AND TRUST
COMPANY
By: /s/ Timothy B. Harbert
----------------------------
Timothy B. Harbert
Senior Vice President
7
<PAGE> 9
EXHIBIT "A"
As consideration for the Adviser's services to the following Fund(s), the
Adviser shall receive from the Fund(s) an annual advisory fee, accrued daily at
the rate of 1/365th of the applicable advisory fee rate and payable monthly on
the first business day of each month, of the following annual percentages of the
Fund's average daily net assets during the month:
Fund Rate
---- ----
Navigator Government Portfolio 0.0175%
Navigator Prime Portfolio 0.0175%
Navigator Short-Term Bond Portfolio 0.05%
<PAGE> 1
EXHIBIT 8
---------
<PAGE> 2
CUSTODIAN CONTRACT
Between
NAVIGATOR SECURITIES LENDING TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 3
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT.....................1
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN IN THE UNITED STATES........................................2
2.1 HOLDING SECURITIES..................................................2
2.2 DELIVERY OF SECURITIES..............................................2
2.3 REGISTRATION OF SECURITIES..........................................4
2.4 BANK ACCOUNTS.......................................................4
2.5 AVAILABILITY OF FEDERAL FUNDS.......................................5
2.6 COLLECTION OF INCOME................................................5
2.7 PAYMENT OF FUND MONIES..............................................5
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.6
2.9 APPOINTMENT OF AGENTS...............................................7
2.10 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS...................7
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.............8
(ii)
<PAGE> 4
2.12 SEGREGATED ACCOUNT..................................................9
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES............................10
2.14 PROXIES............................................................10
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES....................10
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES.............................................10
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS..............................10
3.2 ASSETS TO BE HELD..................................................10
3.3 FOREIGN SECURITIES SYSTEMS.........................................11
3.4 HOLDING SECURITIES.................................................11
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS.......................11
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND......................11
3.7 REPORTS BY CUSTODIAN...............................................12
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT............................12
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS................................12
3.10 LIABILITY OF CUSTODIAN.............................................13
3.11 REIMBURSEMENT FOR ADVANCES.........................................13
3.12 MONITORING RESPONSIBILITIES........................................13
3.13 BRANCHES OF U.S. BANKS.............................................14
3.14 TAX LAW............................................................14
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND...14
5. PROPER INSTRUCTIONS......................................................15
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY..............................15
7. EVIDENCE OF AUTHORITY....................................................16
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME..................... ......16
9. RECORDS..................................................................16
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT.................................17
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS........................17
12. COMPENSATION OF CUSTODIAN................................................17
13. RESPONSIBILITY OF CUSTODIAN..............................................17
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT..............................19
(iii)
<PAGE> 5
15. SUCCESSOR CUSTODIAN....................................................19
16. INTERPRETIVE AND ADDITIONAL PROVISIONS.................................20
17. ADDITIONAL FUNDS.......................................................20
18. MASSACHUSETTS LAW TO APPLY.............................................20
19. PRIOR CONTRACTS........................................................21
20. SHAREHOLDER COMMUNICATIONS ELECTION....................................21
21. LIMITATIONS OF LIABILITY OF THE TRUSTEES...............................21
(iv)
<PAGE> 6
CUSTODIAN CONTRACT
------------------
This Contract between the NAVIGATOR SECURITIES LENDING TRUST, a business
trust organized and existing under the laws of the Commonwealth of
Massachusetts, having its principal place of business at Two International
Place, Boston, MA 02110, hereinafter called the "Fund", and State Street Bank
and Trust Company, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in Navigator Government
Portfolio, Navigator Prime Portfolio and Navigator Short-Term Bond Portfolio
(such series together with all other Funds subsequently established by the Fund
and made subject to this Contract in accordance with paragraph 17, being herein
referred to as the "Portfolios");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio, desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Declaration of
Trust. The Fund on behalf of the Portfolios agrees to deliver to the Custodian
all securities and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect to all
securities owned by the Portfolios from time to time, and the cash consideration
received by it for such new or treasury shares of beneficial interest of the
Fund representing interests in the Portfolios, ("Shares") as may be issued or
sold from time to time. The Custodian shall not be responsible for any property
of a Portfolio held or received by the Portfolio and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5), the
Custodian shall on behalf of the applicable Portfolios from time to time employ
one or more sub-custodians, located in the United States but only in accordance
with an applicable vote by the Board of Trustees of the Fund on behalf of the
applicable Portfolio(s), and provided that the Custodian shall have no more or
less responsibility or liability to the Fund on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian. The Custodian may employ as sub-custodian for the Fund's foreign
securities on behalf of the applicable Portfolios the foreign banking
institutions and foreign securities
<PAGE> 7
depositories designated in Schedule A hereto but only in accordance with the
provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
------------------------------------------------------------------------
Custodian in the United States
------------------------------
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository
or in a book-entry system authorized by the U.S. Department of the
Treasury (each, a U.S. Securities System") and (b) commercial paper of
an issuer for which State Street Bank and Trust Company acts as issuing
and paying agent ("Direct Paper") which is deposited and/or maintained
in the Direct Paper System of the Custodian (the "Direct Paper System")
pursuant to Section 2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund on behalf of the
applicable Portfolio, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities System,
in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or for
exchange for a different number of bonds, certificates or
2
<PAGE> 8
other evidence representing the same aggregate face amount or
number of units; PROVIDED that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, BUT ONLY against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund on
behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's account
in the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible
for the delivery of securities owned by the Portfolio prior to
the receipt of such collateral;
11) For delivery as security in connection with any borrowing by the
Fund on behalf of the Portfolio requiring a pledge of assets by
the Fund on behalf of the Portfolio, BUT ONLY against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange, or of any
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similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio of
the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the currently effective
prospectus and statement of additional information of the Fund,
related to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of,
Proper Instructions.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized
in writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as
the Portfolio, or in the name or nominee name of any agent appointed
pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Portfolio under the terms of this
Contract shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize its best efforts only to
timely collect income due the Fund on such securities and to notify the
Fund on a best efforts basis only of relevant corporate actions
including, without limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained
by the Portfolio in a bank account established and used in accordance
with Rule 17f-3 under the Investment Company Act of 1940. Funds
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<PAGE> 10
held by the Custodian for a Portfolio may be deposited by it to its
credit as Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as it may in its discretion deem
necessary or desirable; PROVIDED, however, that every such bank or
trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company
and the funds to be deposited with each such bank or trust company
shall on behalf of each applicable Portfolio be approved by vote of a
majority of the Board of Trustees of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund
on behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf
of a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
such Portfolio which are deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on
the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to such Portfolio's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of title
to such options, futures contracts or options on futures contracts to
the Custodian (or any bank, banking firm or trust
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<PAGE> 11
company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended, to act
as a custodian and has been designated by the Custodian as its agent
for this purpose) registered in the name of the Portfolio or in the
name of a nominee of the Custodian referred to in Section 2.3 hereof or
in proper form for transfer; (b) in the case of a purchase effected
through a U.S. Securities System, in accordance with the conditions set
forth in Section 2.10 hereof; (c) in the case of a purchase involving
the Direct Paper System, in accordance with the conditions set forth in
Section 2.11; (d) in the case of repurchase agreements entered into
between the Fund on behalf of the Portfolio and the Custodian, or
another bank, or a broker-dealer which is a member of NASD, (i) against
delivery of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve Bank
with such securities or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the Custodian along
with written evidence of the agreement by the Custodian to repurchase
such securities from the Portfolio or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or foreign;
such transfer may be effected prior to receipt of a confirmation from a
broker and/or the applicable bank pursuant to Proper Instructions from
the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
of the Fund whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of Proper
Instructions.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of
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specific written instructions from the Fund on behalf of such Portfolio
to so pay in advance, the Custodian shall be absolutely liable to the
Fund for such securities to the same extent as if the securities had
been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; PROVIDED, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "U.S. Securities System" in
accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the U.S. Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the U.S.
Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon (i) receipt of advice
from the U.S. Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer
and payment for the account of the Portfolio. Copies of all
advises from the U.S. Securities System of transfers of
securities for the account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the Custodian and
be provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
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<PAGE> 13
Portfolio in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the U.S.
Securities System for the account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as
it may have against the U.S. Securities System; at the election
of the Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claim against the U.S.
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such
loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
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<PAGE> 14
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the U.S.
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonably request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased
or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, BUT ONLY, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution of
the Board of Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
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2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer
or any other similar transaction, the Portfolio shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside of
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the United States
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3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund may authorize and
instruct the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 5 of this
Contract, together with a certified resolution of the Fund's Board of
Trustees, the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate foreign banking institutions and
foreign securities depositories to act as sub-custodian. Upon receipt
of Proper Instructions, the Fund may instruct the Custodian to cease
the employment of any one or more such sub-custodians for maintaining
custody of the Portfolio's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities",
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as defined in paragraph (c)(1) of Rule 17f-5 under the Investment
Company Act of 1940, and (b) cash and cash equivalents in such amounts
as the Custodian or the Fund may determine to be reasonably necessary
to effect the Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund, the
foreign securities of the Fund held by each foreign sub-custodian.
3.3 FOREIGN SECURITIES SYSTEMS. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall
be maintained in a clearing agency which acts as a securities
depository or in a book-entry system for the central handling of
securities located outside the United States (each a "Foreign
Securities System") only through arrangements implemented by the
foreign banking institutions serving as sub-custodians pursuant to the
terms hereof (Foreign Securities Systems and U.S. Securities Systems
are collectively referred to herein as the "Securities Systems"). Where
possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.5 hereof.
3.4 HOLDING SECURITIES. The Custodian may hold securities and other
non-cash property for all of its customers, including the Fund, with a
Foreign Sub-custodian in a single account that is identified as
belonging to the Custodian for the benefit of its customers, PROVIDED
HOWEVER, that (i) the records of the Custodian with respect to
securities and other non-cash property of the Fund which are maintained
in such account shall identify by book-entry those securities and other
non-cash property belonging to the Fund and (ii) the Custodian shall
require that securities and other non-cash property so held by the
Foreign Sub-custodian be held separately from any assets of the Foreign
Sub-custodian or of others.
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership for the assets of
each Portfolio will be freely transferable without the payment of money
or value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to each
applicable Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted
under applicable law the independent public accountants for the Fund,
will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking
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institution employed as a foreign sub-custodian insofar as such books
and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio(s) securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio, the identity of
the entity having physical possession of such securities.
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, MUTATIS MUTANDIS to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance with
the customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of record
of such securities.
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and the Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
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3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.13 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.10, in delegating custody duties to
State Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.
3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200 million (U.S. dollars
or the equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles).
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3.13 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account established for the
Fund with the Custodian's London branch, which account shall be subject
to the direction of the Custodian, State Street London Ltd. or both.
3.14 TAX LAW. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of America
or any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
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The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in
14
<PAGE> 20
accordance with such procedures and controls as are mutually agreed upon from
time to time between the Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing signed
or initialed by one or more person or persons as the Board of Trustees shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.12.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from the Fund
on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, PROVIDED that all such payments shall be accounted
for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Portfolio
except as otherwise directed by the Board of Trustees of the
Fund.
15
<PAGE> 21
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper reasonably believed
by it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of the
Board of Trustees of the Fund as conclusive evidence (a) of the authority of any
person to act in accordance with such vote or (b) of any determination or of any
action by the Board of Trustees pursuant to the Declaration of Trust as
described in such vote, and such vote may be considered as in full force and
effect until receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation of
---------------------------------------------------------------------------
Net Asset Value and Net Income
------------------------------
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Fund's currently effective prospectus related to such
Portfolio.
9. Records
-------
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
16
<PAGE> 22
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf of each
applicable Portfolio may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of the Fund's Form N-1A,
and Form N-SAR or other annual reports to the Securities and Exchange Commission
and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund, on behalf of each of the Portfolios at
such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence, bad faith or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be
17
<PAGE> 23
without liability to the Fund for any loss, liability, claim or expense
resulting from or caused by: (i) events or circumstances beyond the reasonable
control of the Custodian or any sub-custodian or Securities System or any agent
or nominee of any of the foregoing, including, without limitation,
nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts; (ii) errors by the Fund or the Investment Advisor
in their instructions to the Custodian provided such instructions have been in
accordance with this Contract; (iii) the insolvency of or acts or omissions by a
Securities System; (iv) any delay or failure of any broker, agent or
intermediary, central bank or other commercially prevalent payment or clearing
system to deliver to the Custodian's sub-custodian or agent securities purchased
or in the remittance or payment made in connection with securities sold; (v) any
delay or failure of any company, corporation, or other body in charge or
registering or transferring securities in the name of the Custodian, the Fund,
the Custodian's sub-custodians, nominees or agents or agents or any
consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or
any other country, or political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect to sub-custodians
generally in this Contract.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund assets to
the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
18
<PAGE> 24
14. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; PROVIDED, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities System by such Portfolio, as required by
Rule 17f-4 under the Investment Company Act of 1940, as amended and that the
Custodian shall not with respect to a Portfolio act under Section 2.11 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has approved the initial use of
the Direct Paper System by such Portfolio; PROVIDED FURTHER, however, that the
Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Declaration of
Trust, and further provided, that the Fund on behalf of one or more of the
Portfolios may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
-------------------
If a successor custodian for the Fund, of one or more of the Portfolios shall
be appointed by the Board of Trustees of the Fund, the Custodian shall, upon
termination, deliver to such successor custodian at the office of the Custodian,
duly endorsed and in the form for transfer, all securities of each applicable
Portfolio then held by it hereunder and shall transfer to an account of the
successor custodian all of the securities of each such Portfolio held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to
19
<PAGE> 25
deliver to a bank or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, doing business in Boston, Massachusetts, of its
own selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of each
applicable Portfolio and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract on behalf of each
applicable Portfolio and to transfer to an account of such successor custodian
all of the securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and the Fund
on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
17. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to the Navigator Government Portfolio, the Navigator Prime Portfolio,
and the Navigator Short-Term Bond Portfolio with respect to which it desires to
have the Custodian render services as custodian under the terms hereof, it shall
so notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
18. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted under
and in accordance with laws of The Commonwealth of Massachusetts.
20
<PAGE> 26
19. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
20. Shareholder Communications Election
-----------------------------------
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.
21. Limitations of Liability of the Trustees
----------------------------------------
A copy of the Declaration of Trust of the Trust is on file with the Secretary
of the Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees and
not individually and that the obligations of this instrument are not binding
upon any of the Trustees individually but are binding only upon the assets and
property of the Fund.
21
<PAGE> 27
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed as of the 4th day of March 1996.
ATTEST
/s/ Janet Wertheimer By /s/ M. Bradley Jacobs, Attorney-in-fact
- ---------------------------- ---------------------------------------
NAVIGATOR SECURITIES LENDING TRUST
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Francine Hayes By /s/ Ronald E. Logue
- ---------------------------- ---------------------------------------
Executive Vice President
22
<PAGE> 28
Schedule A
----------
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of the NAVIGATOR
SECURITIES LENDING TRUST for use as sub-custodians for the Fund's securities and
other assets:
None
Certified:
- ------------------------------
Fund's Authorized Officer
Date:
------------------------
<PAGE> 29
STATE STREET BANK AND TRUST COMPANY
CUSTODY AND ACCOUNTING FEE SCHEDULE
GLOBAL SECURITIES LENDING
I. CUSTODY, PORTFOLIO AND FUND ACCOUNTING
CUSTODY: Maintain custody of fund assets. Settle portfolio purchases and
sales. Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions. Monitor corporate actions.
Report portfolio positions.
PORTFOLIOS AND FUND ACCOUNTING: Maintain investment ledgers, provide
selected portfolio transactions, position and income reports. Maintain general
ledger and participant capital accounts. Prepare daily trial balance. Calculate
net asset value daily. Provide selected general ledger reports. Securities yield
or market value quotations will be provided to State Street's Automated Pricing
System (see Section V).
The fee shown below is an annual charge, billed and payable monthly, based
on average monthly net assets.
<TABLE>
ANNUAL FEES PER PORTFOLIO
-------------------------
<CAPTION>
Custody
-------
Fund Net Assets
---------------
<S> <C>
First $1 Billion .25 basis points
Next $9 Billion .20 basis points
Excess $10 Billion .15 basis points
Accounting
----------
Monthly Charge $2,500
</TABLE>
<TABLE>
<CAPTION>
II. PORTFOLIO TRANSACTIONS
<S> <C>
State Street Bank Repos $ 2.00
DTC or Fed Book Entry $ 2.00
New York Physical Settlements $25.00
Maturity Collections $ 8.00
PTC Purchase, Sale, Deposit or Withdrawal $13.50
Per Paydown $10.00
All Other Trades $16.00
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C>
III. FUTURES AND OPTIONS
Option charge for each option written or
closing contract, per issue, per broker $ 25.00
Option expiration or exercised charge,
per issue, per broker $ 15.00
Futures transactions -- no security movement $ 8.00
IV. HOLDING CHARGE
For each issue maintained -- monthly charge $ 5.00
V. NAVIGATOR AUTOMATED PRICING
Monthly Base Charge $375.00
Monthly Quote Charge:
Municipal Bonds via Kenny/S&P or Muller Data $ 16.00
Corporate, Municipal, Convertible, Government Bonds
and Adjustable Rate Preferred Stocks Via IDSI $ 13.00
Government, Corporate Bonds via Kenny/S&P or Muller $ 11.00
Government, Corporate and Convertible
Bonds via Merrill Lynch $ 11.00
Foreign Bonds via Extel $ 10.00
Options, Futures and Private Placements $ 6.00
Listed Equities (including International) and OTC Equities $ 6.00
</TABLE>
For billing purposes, the quote charge will be based on the average number
of positions in the portfolio at month end.
VI. SPECIAL SERVICES
Fees for activities of a non-recurring nature such as fund consolidations
or reorganizations, extraordinary security shipments and the preparation of
special reports will be subject to negotiation. Fees for SEC yield calculation,
fund administration activities, self directed securities lending transactions,
SaFiRe financial reporting, multiple class and core/feeder accounting, and other
special items will be negotiated separately.
VII. OUT-OF-POCKET EXPENSES
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but are not
limited to the following:
<PAGE> 31
- Telephone - Transfer Fees
- Wire Charges ($5.25 in and $5 out) - Price Waterhouse Audit Letter
- Postage and Insurance - Federal Reserve Fee for Return
- Courier Service - Check items over $2,500 ($4.25 each)
- Duplicating - GNMA Transfer ($15 each)
- Legal Fees - PTC Deposit/Withdrawal for same
- Supplies Related to Fund Records day turnaround ($50 each)
- Rush Transfer ($8 each) - Subcustodian charges
- Items held in Street name over record
date at request of trader ($50 each)
VIII. PAYMENT
The above fees will be charges against the fund's custodian checking
account five (5) days after the invoice is mailed to the fund's offices.
FUND NAME STATE STREET BANK & TRUST COMPANY
By By
---------------------------- --------------------------------
Title Title
---------------------------- --------------------------------
Date Date
---------------------------- --------------------------------
<PAGE> 1
EXHIBIT 9(a)
------------
<PAGE> 2
TRANSFER AGENCY AND SERVICE AGREEMENT
between
NAVIGATOR SECURITIES LENDING TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 3
<TABLE>
<S> <C>
1. Terms of Appointment; Duties of the Bank....................................1
2. Fees and Expenses...........................................................4
3. Representations and Warranties of the Bank .................................4
4. Representations and Warranties of the Fund..................................5
5. Data Access and Proprietary Information.....................................5
6. Indemnification.............................................................7
7. Standard of Care............................................................8
8. Covenants of the Fund and the Bank..........................................8
9. Termination of Agreement....................................................9
10 Additional Funds............................................................9
11. Assignment..................................................................9
12. Amendment..................................................................10
13. Massachusetts Law to Apply.................................................10
14. Force Majeure..............................................................10
15. Consequential Damages......................................................10
16. Merger of Agreement........................................................10
</TABLE>
(iv)
<PAGE> 4
<TABLE>
<S> <C>
17. Limitations of Liability of the Trustees and Shareholders..................10
18. Counterparts...............................................................11
</TABLE>
(v)
<PAGE> 5
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 4th day of March, 1996, by and between
NAVIGATOR SECURITIES LENDING TRUST, a Massachusetts business trust,
having its principal office and place of business at Two International Place,
Boston, MA 02110 (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of business at
225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in Navigator
Government Portfolio, Navigator Prime Portfolio and Navigator Short Term Bond
Portfolio (each such portfolio, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Article 10, being herein referred to as a "Portfolio", and collectively as the
"Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the
Bank as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities, and the
Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.1 Subject to the terms and conditions set forth in this
Agreement, the Fund, on behalf of the Portfolios, hereby
employs and appoints the Bank to act as, and the Bank agrees
to act as its transfer agent for the Fund's authorized and
issued shares of its common stock, $.001 par value,
("Shares"), dividend disbursing agent, custodian of certain
retirement plans and agent in connection with any
accumulation, open-account or similar plans provided to the
shareholders of each of the respective Portfolios of the Fund
("Shareholders") and set out in the Confidential Offering
Memorandum and currently effective registration statement
(collectively, the "Prospectus") of the Fund on behalf of the
applicable Portfolio, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 The Bank agrees that it will perform the following services:
a) In accordance with procedures established from time
to time by agreement between the Fund on behalf of
each of the Portfolios, as applicable and the Bank,
the Bank shall:
<PAGE> 6
(i) Receive for acceptance, orders for the
purchase of Shares, and promptly deliver
payment and appropriate documentation
thereof to the Custodian of the Fund on
behalf of the applicable Portfolios
authorized pursuant to the Declaration of
Trust of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the
appropriate number of Shares and hold such
Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests
and redemption directions and deliver the
appropriate documentation thereof to the
Custodian;
(iv) In respect to the transactions in items (i),
(ii) and (iii) above, the Bank shall execute
transactions directly with broker-dealers
authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it
receives monies paid to it by the Custodian
with respect to any redemption, pay over or
cause to be paid over in the appropriate
manner such monies as instructed by the
redeeming Shareholders;
(vi) Effect transfers of Shares by the registered
owners thereof upon receipt of appropriate
instructions;
(vii) Prepare and transmit payments for dividends
and distributions declared by the Fund on
behalf of the applicable Portfolios;
(viii) Issue replacement certificates for those
certificates alleged to have been lost,
stolen or destroyed upon receipt by the Bank
of indemnification satisfactory to the Bank
and protecting the Bank and the Fund, and
the Bank at its option, may issue
replacement certificates in place of
mutilated stock certificates upon
presentation thereof and without such
indemnity;
(ix) Maintain records of account for and advise
the Fund on behalf of the applicable
Portfolios and its Shareholders as to the
foregoing; and
(x) Record the issuance of shares of the Fund on
behalf of the applicable Portfolios and
maintain pursuant to SEC Rule 17Ad- 10(e) a
record of the total number of shares of the
Fund which
2
<PAGE> 7
are authorized, based upon data provided to
it by the Fund, and issued and on behalf of
even Portfolio outstanding. The Bank shall
also provide the Fund on a regular basis
with the total number of shares which are
authorized and issued and outstanding and
shall have no obligation, when recording the
issuance of shares, to monitor the issuance
of such shares or to take cognizance of any
laws relating to the issue or sale of such
Shares, which functions shall be the sole
responsibility of the Fund.
b) In addition to and neither in lieu nor in
contravention of the services set forth in the above
paragraph (a), the Bank shall: (i) perform the
customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement
plans and, as relevant, agent in connection with
accumulation, open-account or similar plans
(including without limitation any periodic investment
plan or periodic withdrawal program), including but
not limited to: maintaining all Shareholder accounts,
preparing Shareholder meeting lists, mailing proxies,
mailing Shareholder reports and prospectuses to
current Shareholders, withholding taxes on U.S.
resident and non-resident alien accounts, preparing
and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required with respect to
dividends and distributions by federal authorities
for all Shareholders, preparing and mailing
confirmation forms and statements of account to
Shareholders for all purchases and redemptions of
Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity
statements for Shareholders, and providing
Shareholder account information and (ii) provide a
system which will enable the Fund to monitor the
total number of Shares sold in each State.
c) In addition, the Fund shall (i) identify to the Bank
in writing those transactions and assets to be
treated as exempt from blue sky reporting for each
State and (ii) verify the establishment of
transactions for each State on the system prior to
activation and thereafter monitor the daily activity
for each State. The responsibility of the Bank for
the Fund's blue sky State registration status is
solely limited to the initial establishment of
transactions subject to blue sky compliance by the
Fund and the reporting of such transactions to the
Fund as provided above.
d) Procedures as to who shall provide certain of these
services in Section 1 may be established from time to
time by agreement between the Fund on behalf of each
Portfolio and the Bank per the attached service
responsibility schedule. The Bank may at times
perform only a portion
3
<PAGE> 8
of these services and the Fund or its agent may
perform these services on the Fund's behalf.
e) The Bank shall provide additional services on behalf
of the Fund (i.e., escheatment services) which may be
agreed upon in writing between the Fund and the Bank.
2. FEES AND EXPENSES
2.1 For the performance by the Bank pursuant to this Agreement,
the Fund agrees on behalf of each of the Portfolios to pay the
Bank an annual maintenance fee for each Shareholder account as
set out in the initial fee schedule attached hereto. Such fees
and out-of-pocket expenses and advances identified under
Section 2.2 below may be changed from time to time subject to
mutual written agreement between the Fund and the Bank.
2.2 In addition to the fee paid under Section 2.1 above, the Fund
agrees on behalf of each of the Portfolios to reimburse the
Bank for out-of-pocket expenses, including but not limited to
confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances
incurred by the Bank for the items set out in the fee schedule
attached hereto. In addition, any other expenses incurred by
the Bank at the request or with the consent of the Fund, will
be reimbursed by the Fund on behalf of the applicable
Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all
fees and reimbursable expenses within [thirty] days following
the receipt of the respective billing notice.
3. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
4
<PAGE> 9
3.5 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good
standing under the laws of Massachusetts.
4.2 It is empowered under applicable laws and by its Declaration
of Trust and ByLaws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to enter
into and perform this Agreement.
4.4 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940,
as amended.
4.5 A registration statement under the Securities Act of 1933, as
amended on behalf of each of the portfolios is currently
effective and will remain effective and will remain effective,
and appropriate state securities law filings have been made
and will continue to be made, with respect to all shares being
offered for sale.
5. DATA ACCESS AND PROPRIETARY INFORMATION
5.1 The Fund acknowledges that the data bases, computer programs,
screen formats, report formats, interactive design techniques,
and documentation manuals furnished to the Fund by the Bank as
part of the Fund's ability to access certain Fund-related data
("Customer Data") maintained by the Bank on data bases under
the control and ownership of the Bank or other third party
("Data Access Services") constitute copyrighted, trade secret,
or other proprietary information (collectively, "Proprietary
Information") of substantial value to the Bank or other third
party. In no event shall Proprietary Information be deemed
Customer Data. The Fund agrees to treat all Proprietary
Information as proprietary to the Bank and further agrees that
it shall not divulge any Proprietary Information to any person
or organization except as may be provided hereunder. Without
limiting the foregoing, the Fund agrees for itself and its
employees and agents:
a) to access Customer Data solely from locations as may
be designated in writing by the Bank and solely in
accordance with the Bank's applicable user
documentation;
5
<PAGE> 10
b) to refrain from copying or duplicating in any way the
Proprietary Information;
c) to refrain from obtaining unauthorized access to any
portion of the Proprietary Information, and if such
access is inadvertently obtained, to inform in a
timely manner of such fact and dispose of such
information in accordance with the Bank's
instructions;
d) to refrain from causing or allowing the data acquired
hereunder from being retransmitted to any other
computer facility or other location, except with the
prior written consent of the Bank;
e) that the Fund shall have access only to those
authorized transactions agreed upon by the parties;
f) to honor all reasonable written requests made by the
Bank to protect at the Bank's expense the rights of
the Bank in Proprietary Information at common law,
under federal copyright law and under other federal
or state law.
Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this Section 5. The obligations of this Section
shall survive any earlier termination of this Agreement.
5.2 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most
recently issued user documentation for such services, the Bank
shall endeavor in a timely manner to correct such failure.
Organizations from which the Bank may obtain certain data
included in the Data Access Services are solely responsible
for the contents of such data and the Fund agrees to make no
claim against the Bank arising out of the contents of such
third-party data, including, but not limited to, the accuracy
thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE
PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY
DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.3 If the transactions available to the Fund include the ability
to originate electronic instructions to the Bank in order to
(i) effect the transfer or movement of cash or Shares or (ii)
transmit Shareholder information or other information, then in
such event the Bank shall be entitled to rely on the validity
and authenticity of such instruction without undertaking any
further inquiry as long
6
<PAGE> 11
as such instruction is undertaken in conformity with security
procedures established by the Bank from time to time.
6. INDEMNIFICATION
6.1 The Bank shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio indemnify and hold the Bank
harmless from and against, any and all losses, damages, costs,
charges, reasonable counsel fees, payments, expenses and
liability arising out of or attributable to:
a) All actions of the Bank or its agents or
subcontractors required to be taken pursuant to this
Agreement, provided that such actions are taken in
good faith and without negligence or willful
misconduct.
b) A Portfolio's lack of good faith, negligence or
willful misconduct which arise out of the breach of
any representation or warranty of a Portfolio
hereunder.
c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or
services which (i) are received by the Bank or its
agents or subcontractors, and (ii) have been
prepared, maintained or performed by a Portfolio or
any other person or firm on behalf of a Portfolio
including but not limited to any previous transfer
agent or registrar.
d) The reliance on, or the carrying out by the Bank or
its agents or subcontractors of any instructions or
requests of a Portfolio.
e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or
regulations or the securities laws or regulations of
any state that such Shares be registered in such
state or in violation of any stop order or other
determination or ruling by any federal agency or any
state with respect to the offer or sale of such
Shares in such state.
6.2 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect
to any matter arising in connection with the services to be
performed by the Bank under this Agreement, and the Bank and
its agents or subcontractors shall not be liable and shall be
kept indemnified for any action reasonably taken or omitted by
it in reliance upon such instructions or upon the opinion of
such counsel. The Bank, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or document
furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or
persons, or upon any instruction, information, data, records
or documents provided the Bank or its
7
<PAGE> 12
agents or subcontractors by machine readable input, telex, CRT
data entry or other similar means authorized by the Fund, and
shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the
Fund. The Bank, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates
which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former
registrar, or of a co-transfer agent or co-registrar.
6.3 The Bank shall promptly notify the Fund of any assertion
holding the Bank or the Fund liable with respect to the Fund
or any Portfolio, and shall keep the Fund advised with respect
to all developments concerning such claim.
7. STANDARD OF CARE
The Bank shall at all times act in good faith and agrees to use its
best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility
and shall not be liable for loss or damage due to errors unless said
errors are caused by its negligence, bad faith, or willful misconduct
or that of its employees.
8. COVENANTS OF THE FUND AND THE BANK
8.1 The Fund shall on behalf of each of the Portfolios promptly
furnish to the Bank the following:
a) A certified copy of the resolution of the Board of
Trustees of the Fund authorizing the appointment of
the Bank and the execution and delivery of this
Agreement.
b) A copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto.
8.2 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for
safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation
or use, and for keeping account of, such certificates, forms
and devices.
8.3 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem
advisable. To the extent required by Section 31 of the
Investment Company Act of 1940, as amended, and the Rules
thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be
performed by the Bank hereunder are the property of the Fund
and will be preserved, maintained and made available in
8
<PAGE> 13
accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its
request.
8.4 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other
party which are exchanged or received pursuant to the
negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
8.5 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to
notify the Fund and to secure instructions from an authorized
officer of the Fund as to such inspection. The Bank reserves
the right, however, to exhibit the Shareholder records to any
person whenever it is advised by its counsel that it may be
held liable for the failure to exhibit the Shareholder records
to such person.
9. TERMINATION OF AGREEMENT
9.1 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
9.2 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records
and material will be borne by the Fund on behalf of the
applicable Portfolios.
10. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to the Navigator Government Portfolio, the Navigator Prime
Portfolio and Navigator Short Term Bond Portfolio with respect to which
it desires to have the Bank render services as transfer agent under the
terms hereof, it shall so notify the Bank in writing, and if the Bank
agrees in writing to provide such services, such series of Shares shall
become a Portfolio hereunder.
11. ASSIGNMENT
11.1 Except as provided below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
11.2 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and
assigns.
9
<PAGE> 14
11.3 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston
Financial Data Services, Inc., a Massachusetts corporation
("BFDS") which is duly registered as a transfer agent pursuant
to Section 17A(c)(1) of the Securities Exchange Act of 1934,
as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(1)
or (iii) a BFDS affiliate; provided, however, that the Bank
shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor as it is for its own acts and
omissions.
12. AMENDMENT
This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of
the Board of Trustees of the Fund.
13. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.
14. FORCE MAJEURE
In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment
or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be
liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
15. CONSEQUENTIAL DAMAGES
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act
hereunder.
16. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
17. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is
10
<PAGE> 15
executed on behalf of the Trustees of the Trust as Trustees and not
individually and that the obligations of this instrument are not
binding upon any of the Trustees or Shareholders individually but are
binding only upon the assets and property of the Fund.
18. COUNTERPARTS
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
NAVIGATOR SECURITIES LENDING TRUST
BY: /s/ M. Bradley Jacobs
--------------------------------
Attorney-in-Fact
ATTEST:
/s/ Janet Wertheimer
- ----------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Legue
--------------------------------
Executive Vice President
ATTEST:
/s/ Francine Hayes
- ----------------------------------
11
<PAGE> 16
<TABLE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
<CAPTION>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
<S> <C> <C> <C>
1. Receives orders for the purchase of Shares.
2. Issue Shares and hold Shares in Shareholders accounts.
3. Receive redemption requests.
4. Effect transactions 1-3 above directly
with broker-dealers.
5. Pay over monies to redeeming Shareholders.
6. Effect transfers of Shares.
7. Prepare and transmit dividends and distributions.
8. Issue Replacement Certificates.
9. Reporting of abandoned property.
10. Maintain records of account.
11. Maintain and keep a current and accurate control
book for each issue of securities.
12. Mail proxies.
13. Mail Shareholder reports.
14. Mail prospectuses to current Shareholders.
15. Withhold taxes on U.S. resident and non-resident
alien accounts.
16. Prepare and file U.S. Treasury Department forms.
17. Prepare and mail account and confirmation statements
for Shareholders.
18. Provide Shareholder account information.
19. Blue sky reporting.
</TABLE>
12
<PAGE> 17
Such services are more fully described in Section 1.2 (a), (b) and (c)
of the Agreement.
NAVIGATOR SECURITIES LENDING TRUST
BY: /s/ M. Bradley Jacobs, Attorney-in-fact
---------------------------------------
ATTEST:
/s/ Janet Wertheimer
- ----------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
---------------------------------------
Executive Vice President
ATTEST:
/s/ Francine Hayes
- ----------------------------------
13
<PAGE> 18
STATE STREET BANK AND TRUST COMPANY
<TABLE>
GLOBAL CLIENT SUPPORT - TRANSFER AGENT
OPERATIONS FEE SCHEDULE
<CAPTION>
ITEM DESCRIPTION PRICE
<S> <C> <C>
Monthly Maintenance Fee 0 - 25 Shareholders $1,000.00
26 - 50 Shareholders $1,500.00
51 - 100 Shareholders $2,000.00
101 - 200 Shareholders $2,500.00
Trade Fee (Per Trade) $2.00
</TABLE>
Out of Pocket Expenses billed to client which include but is not limited to:
custom system enhancements, communication and mailing costs.
<PAGE> 1
EXHIBIT 9(b)
------------
<PAGE> 2
ADMINISTRATION AGREEMENT
Between
NAVIGATOR SECURITIES LENDING TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 3
ADMINISTRATION AGREEMENT
Agreement dated as of March 4, 1996 by and between State Street Bank
and Trust Company, a MASSACHUSETTS TRUST COMPANY (the "Administrator"), and
NAVIGATOR SECURITIES LENDING TRUST, a Massachusetts business trust (the
"Investment Company").
WHEREAS, the Investment Company is an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
currently consisting of three portfolio series, the Navigator Government
Portfolio, the Navigator Prime Portfolio, and the Navigator Short-Term Bond
Portfolio (the "Initial Funds"), having their own investment policies; and
WHEREAS, the Investment Company desires to retain the Administrator to
furnish certain administrative services to the Initial Funds and possibly such
other funds (the "Additional Funds"),and the Administrator is willing to furnish
such services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Investment Company hereby appoints the Administrator to act as
administrator with respect to the Funds for purposes of providing certain
administrative services for the period and on the terms set forth in this
Agreement. The Administrator accepts such appointment and agrees to render the
services stated herein.
The Initial Funds will initially consist of the three portfolios and
one class of shares (each Initial Fund shall be listed in Schedule A to this
Agreement). In the event that the Investment Company establishes Additional
Funds with respect to which it wishes to retain the Administrator to act as
administrator hereunder, the Investment Company shall notify the Administrator
in writing. Upon written acceptance by the Administrator, such Additional Funds
shall become subject to the provisions of this Agreement to the same extent as
the existing Initial Funds, except to the extent that such provisions (including
those relating to the compensation and expenses payable by the Initial Funds)
may be modified in writing by the Investment Company and the Administrator at
the time of the addition of the Additional Fund. Each Initial Fund and
Additional Fund being referred to herein as a "Fund" and collectively as the
"Funds."
2. DELIVERY OF DOCUMENTS
The Investment Company will promptly deliver to the Administrator
copies of each of the following documents and all future amendments and
supplements, if any:
<PAGE> 4
a. The Investment Company's Declaration of Trust and
by-laws, as well as each Fund's Sub-Trust (as defined
in the Declaration of Trust);
b. The Investment Company's currently effective
registration statement under the 1940 Act and the
Investment Company's Confidential Offering Memorandum
relating to all Funds and all amendments and
supplements thereto as in effect from time to time;
c. Certified copies of the resolutions of the Board of
Trustees of the Investment Company (the "Board")
authorizing (1) the Funds to enter into this
Agreement and (2) certain individuals on behalf of
the Funds to (a) give instructions to the
Administrator pursuant to this Agreement and (b) sign
checks and pay expenses;
d. A copy of the investment advisory agreement between
the Investment Company and its investment adviser;
and
e. Such other certificates, documents or opinions which
the Administrator may, in its reasonable discretion,
deem necessary or appropriate in the proper
performance of its duties.
3. REPRESENTATION AND WARRANTIES OF THE ADMINISTRATOR
The Administrator represents and warrants to the Investment Company
that:
a. It is a Massachusetts trust company, duly organized,
existing and in good standing under the laws of The
Commonwealth of Massachusetts;
b. It has the corporate power and authority to carry on
its business in The Commonwealth of Massachusetts;
c. All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement;
d. No legal or administrative proceedings have been
instituted or threatened which would impair the
Administrator's ability to perform its duties and
obligations under this Agreement; and
e. Its entrance into this Agreement shall not cause a
material breach or be in material conflict with any
other agreement or obligation of the Administrator or
any law or regulation applicable to it.
2
<PAGE> 5
4. REPRESENTATION AND WARRANTIES OF THE INVESTMENT COMPANY
The Investment Company represents and warrants to the Administrator
that:
a. It is a Massachusetts business trust, duly organized
and existing and in good standing under the laws of
the Commonwealth of Massachusetts;
b. It has the corporate power and authority under
applicable laws and by its Declaration of Trust and
by-laws to enter into and perform this Agreement;
c. All requisite proceedings have been taken to
authorize it to enter into and perform this
Agreement;
d. It is an investment company properly registered under
the 1940 Act;
e. A registration statement under the 1940 Act has been
filed and will be effective and remain effective
during the term of this Agreement; the Investment
Company also warrants to the Administrator that all
necessary filings under the securities laws of the
states in which each Fund offers or sells its shares
will have been made and will be current during the
term of this Agreement.
f. No legal or administrative proceedings have been
instituted or threatened which would impair the
Investment Company's ability to perform its duties
and obligations under this Agreement;
g. Its entrance into this Agreement shall not cause a
material breach or be in material conflict with any
other agreement or obligation of the Investment
Company or any law or regulation applicable to it;
and
h. As of the close of business on the date of this
Agreement, the Investment Company is authorized to
issue an unlimited number of shares of beneficial
interest in separate Funds.
5. ADMINISTRATION SERVICES
The Administrator shall provide the following services, in each case,
subject to the control, supervision and direction of the Investment Company and
the review and comment by the Investment Company's auditors and legal counsel
and in accordance with procedures which may be established from time to time
between the Investment Company and the Administrator:
3
<PAGE> 6
a. Oversee the determination and publication of each
Fund's net asset value in accordance with the
Investment Company's policy as adopted from time to
time by the Board;
b. Oversee the maintenance by the Fund's custodian of
certain books and records of each Fund as required
under Rule 31a-1(b) of the 1940 Act;
c. Prepare the Fund's federal, state and local income
tax returns for review by the Fund's independent
accountants and filing by the Fund's treasurer;
d. Prepare for review and approval by officers of the
Fund financial information for the Fund's semi-annual
and annual reports, proxy statements and other
communications required or otherwise to be sent to
Fund shareholders, and arrange for the printing and
dissemination of such reports and communications to
shareholders;
e. Prepare for review by an officer of and legal counsel
for the Investment Company the Fund's periodic
financial reports required to be filed with the
Securities and Exchange Commission ("SEC") on Form
N-SAR and financial information required by Form N-1A
and such other financial information, reports, forms
or filings as may be mutually agreed upon;
f. Prepare reports relating to the business and affairs
of the Fund as may be mutually agreed upon and not
otherwise prepared by the Fund's investment adviser,
custodian, legal counsel or independent accountants;
g. Consult with the Fund's officers, independent
accountants, legal counsel, custodian and Transfer
Agent in establishing the accounting policies of the
Fund;
h. Review implementation of any dividend reinvestment
programs authorized by the Board;
i. Respond to, or refer to the Fund's officers or
Transfer Agent, shareholder inquiries relating to the
Fund;
j. Provide periodic testing of portfolios to assist the
Fund's investment adviser in complying with Internal
Revenue Code mandatory qualification requirements,
the requirements of the 1940 Act and Fund prospectus
limitations as may be mutually agreed upon;
k. Review and provide assistance on shareholder
communications;
4
<PAGE> 7
l. Maintain general corporate calendar;
m. File annual and semi-annual shareholder reports with
the appropriate regulatory agencies;
n. Organize, attend and prepare minutes of shareholder
meetings;
o. Provide consultation on regulatory matters relating
to portfolio management, Fund operations and any
potential changes in the Fund's investment policies,
operations or structure; act as liaison to legal
counsel to the Fund and, where applicable, to legal
counsel to the Fund's independent Board members;
p. Maintain continuing awareness of significant emerging
regulatory and legislative developments which may
affect the Funds, update the Board and the investment
adviser on those developments and provide related
planning assistance where requested or appropriate;
q. Develop or assist in developing guidelines and
procedures to improve overall compliance by the Funds
and their various agents;
r. Counsel and assist the Funds in the handling of
routine regulatory examinations and work closely with
the Investment Company's legal counsel in response to
any non-routine regulatory matters;
Subject to review and comment by the Investment Company's legal
counsel:
s. Prepare and file with the SEC amendments to the
Investment Company's registration statement,
including updating the Prospectus and Statement of
Additional Information, where applicable;
t. Prepare and file with the SEC proxy statements;
provide consultation on proxy solicitation matters;
u. Prepare agenda and background materials for Board
meetings, make presentations where appropriate,
prepare minutes and follow-up on matters raised at
Board meetings; and
v. Prepare and file with the SEC Rule 24f-2 notices.
The Administrator shall provide the office facilities and the personnel
required by it to perform the services contemplated herein.
5
<PAGE> 8
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from the Funds such compensation for
the Administrator's services provided pursuant to this Agreement as may be
agreed to from time to time in a written fee schedule approved by the parties
and initially set forth in Schedule B to this Agreement. The fees are accrued
daily and billed monthly and shall be due and payable within 30 days of receipt
of the invoice. Upon the termination of this Agreement before the end of any
month, the fee for the part of the month before such termination shall be
prorated according to the proportion which such part bears to the full monthly
period and shall be payable upon the date of termination of this Agreement.
The Funds will bear all expenses that are incurred in their operation
and not specifically assumed by the Administrator. Expenses to be borne by the
Funds include, but are not limited to: organizational expenses; cost of services
of independent accountants and outside legal and tax counsel (including such
counsel's review of the Investment Company's registration statement, proxy
materials, federal and state tax qualification as a regulated investment company
and other reports and materials prepared by the Administrator under this
Agreement); cost of any services contracted for by the Funds directly from
parties other than the Administrator; cost of trading operations and brokerage
fees, commissions and transfer taxes in connection with the purchase and sale of
securities for the Funds; investment advisory fees; taxes, insurance premiums
and other fees and expenses applicable to its operation; costs incidental to any
meetings of shareholders including, but not limited to, legal and accounting
fees, proxy filing fees and the costs of preparation, printing and mailing of
any proxy materials; costs incidental to Board meetings, including fees and
expenses of Board members; the salary and expenses of any officers, trustees or
employees of the Funds; costs incidental to the preparation, printing and
distribution of the Investment Company's registration statements and any
amendments thereto and shareholder reports; cost of typesetting and printing of
prospectuses; cost of preparation and filing of the Fund's tax returns, Form
N-1A or N-8A and Form N-SAR, and all notices, registrations and amendments
associated with applicable federal and state tax and securities laws; all
applicable registration fees and filing fees required under federal and state
securities laws; fidelity bond and directors' and officers' liability insurance;
and cost of independent pricing services used in computing the Fund's net asset
value.
The Administrator is authorized to and may employ or associate with
such person or persons as the Administrator may deem desirable to assist it in
performing its duties under this Agreement; provided, however, that the
compensation of such person or persons shall be paid by the Administrator and
that the Administrator shall be as fully responsible to the Funds for the acts
and omissions of any such person or persons as it is for its own acts and
omissions.
7. INSTRUCTIONS AND ADVICE
At any time, the Administrator may apply to any officer of the
Investment Company for instructions and may consult with its own legal counsel
or outside counsel for the
6
<PAGE> 9
Investment Company or the independent accountants for the Investment Company at
the expense of the Investment Company, with respect to any matter arising in
connection with the services to be performed by the Administrator under this
Agreement. The Administrator shall not be liable for any action reasonably taken
or omitted by it in good faith in reliance upon any such instructions or advice
or upon any paper or document believed by it to be genuine and to have been
signed by the proper person or persons. The Administrator shall not be held to
have notice of any change of authority of any person until receipt of written
notice thereof from the Investment Company. Nothing in this paragraph shall be
construed as imposing upon the Administrator any obligation to seek such
instructions or advice, or to act in accordance with such advice when received.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION
The Administrator shall be responsible for the performance of only such
duties as are set forth in this Agreement and, except as otherwise provided
under Section 6, shall have no responsibility for the actions or activities of
any other party, including other service providers. The Administrator shall have
no liability for any error of judgment or mistake of law or for any loss or
damage resulting from the performance or nonperformance of its duties hereunder
unless caused by or resulting from the negligence or willful misconduct of the
Administrator, its officers or employees. The Administrator shall not be liable
for any special, indirect, incidental, or consequential damages or any kind
whatsoever (including, without limitation, attorneys' fees) under any provision
of this Agreement or for any such damages arising out of any act or failure to
act hereunder. In any event, the Administrator's liability under this Agreement
shall be limited to its total annual compensation earned and fees paid hereunder
during the preceding twelve months for any liability or loss suffered by a
Portfolio including, but not limited to, any liability relating to qualification
of the Fund as a regulated investment company or any liability relating to a
portfolio's compliance with any federal or state tax or securities statute,
regulation or ruling.
The Administrator shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its control, including
without limitation, work stoppage, power or other mechanical failure, computer
virus, natural disaster, governmental action or communication disruption, nor
shall any such failure or delay give the Investment Company the right to
terminate this Agreement.
The Fund shall indemnify and hold the Administrator harmless from all
loss, cost, damage and expense, including reasonable fees and expenses for
counsel, incurred by the Administrator resulting from any claim, demand, action
or suit in connection with the Administrator's acceptance of this Agreement, any
action or omission by it in the performance of its duties hereunder, or as a
result of acting upon any instructions reasonably believed by it to have been
duly authorized by the Fund, provided that this indemnification shall not apply
to actions or omissions of the Administrator, its officers or employees in cases
of its or their own negligence or willful misconduct.
7
<PAGE> 10
The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any liability subject to the indemnification provided above. In the
event the Fund elects to assume the defense of any such suit and retain counsel,
the Administrator or any of its affiliated persons, named as defendant or
defendants in the suit, may retain additional counsel but shall bear the fees
and expenses of such counsel unless (i) the Fund shall have specifically
authorized the retaining of such counsel or (ii) the Administrator shall have
determined in good faith that the retention of such counsel is required as a
result of a conflict of interest.
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by law or
in connection with any required disclosure to a banking or other regulatory
authority, it will keep confidential all records and information in its
possession relating to the Investment Company, a Fund or its shareholders or
shareholder accounts and will not disclose the same to any person except at the
request or with the written consent of the Investment Company.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
The Investment Company assumes full responsibility for complying with
all securities, tax, commodities and other laws, rules and regulations
applicable to it.
In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Administrator agrees that all records which it maintains for the Investment
Company shall at all times remain the property of the Investment Company, shall
be readily accessible during normal business hours, and shall be promptly
surrendered upon the termination of the Agreement or otherwise on written
request. The Administrator further agrees that all records which it maintains
for the Investment Company, including the Funds pursuant to Rule 31a-1 under the
1940 Act will be preserved for the periods prescribed by Rule 31a-2 under the
1940 Act unless any such records are earlier surrendered as provided above.
Records shall be surrendered in usable machine-readable form.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Investment Company, including
the Funds are not to be deemed exclusive, and the Administrator shall be free to
render similar services to others. The Administrator shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided herein or
authorized by the Investment Company from time to time, have no authority to act
or represent the Investment Company in any way or otherwise be deemed an agent
of the Funds.
8
<PAGE> 11
12. TERM, TERMINATION AND AMENDMENT
This Agreement shall become effective on March __, 1996. The Agreement
shall remain in effect for a period of two years from the effective date, and
shall automatically continue in effect thereafter with respect to the Investment
Company and the Funds unless terminated in writing by either party at the end of
such period or thereafter on sixty (60) days' prior written notice given by
either party to the other party. Termination of this Agreement with respect to
any given Fund shall in no way affect the continued validity of this Agreement
with respect to any other Fund. Upon termination of this Agreement, the Fund
shall pay to the Administrator such compensation and any reimbursable expenses
as may be due under the terms hereof as of the date of such termination,
including reasonable out-of-pocket expenses associated with such termination.
This Agreement may be modified or amended from time to time by mutual written
agreement of the parties hereto.
13. NOTICES
Any notice or other communication authorized or required by this
Agreement to be given to either party shall be in writing and deemed to have
been given when delivered in person or by confirmed facsimile, or posted by
certified mail, return receipt requested, to the following address (or such
other address as a party may specify by written notice to the other): if to the
Investment Company: Navigator Securities Lending Trust, c/o State Street Bank
and Trust Company, Two International Place, Boston, MA 02110, Attn: Senior Vice
President, with a copy to Legal Counsel, fax: (617) 664-2660; if to the
Administrator: State Street Bank and Trust Company, 1776 Heritage Drive, North
Quincy, Massachusetts 02171, Attn: Administrator with a copy to David M. Elwood,
Vice President and Senior Counsel, fax: (617) 985-2497.
14. NON-ASSIGNABILITY
This Agreement shall not be assigned by either party hereto without the
prior consent in writing of the other party, except that the Administrator may
assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by or under common control with
the Administrator.
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of
the Investment Company, including the Funds and the Administrator and their
respective successors and permitted assigns.
9
<PAGE> 12
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties
hereto with respect to the subject matter hereof and supersedes all previous
representations, warranties or commitments regarding the services to be
performed hereunder whether oral or in writing.
17. WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver nor shall it
deprive such party of the right thereafter to insist upon strict adherence to
that term or any term of this Agreement. Any waiver must be in writing signed by
the waiving party.
18. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the
balance of the Agreement shall remain in effect, and if any provision is
inapplicable to any person or circumstance it shall nevertheless remain
applicable to all other persons and circumstances.
19. LIMITATIONS OF LIABILITY OF THE TRUSTEES
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Trustees of the Trust as Trustees
and not individually and that the obligations of this instrument are not binding
upon any of the Trustees individually but are binding only upon the assets and
property of the Fund.
20. GOVERNING LAW
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
NAVIGATOR SECURITIES LENDING TRUST
By: /s/ M. Bradley Jacobs
-----------------------------------
Name: M. Bradley Jacobs
---------------------------------
Title: Attorney-in-fact
--------------------------------
10
<PAGE> 13
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
------------------------------------
Name: Ronald E. Logue
----------------------------------
Title: Executive Vice President
---------------------------------
11
<PAGE> 14
ADMINISTRATION AGREEMENT
NAVIGATOR SECURITIES LENDING TRUST
SCHEDULE A
LISTING OF INVESTMENT FUNDS
Investment Fund
---------------
Navigator Government Portfolio
Navigator Prime Fund
Navigator Short Term Bond Portfolio
<PAGE> 15
ADMINISTRATION AGREEMENT
NAVIGATOR SECURITIES LENDING TRUST
SCHEDULE B
FEES AND EXPENSES
FEES FOR FUND ADMINISTRATION SERVICES INCLUDE: Maintenance of a corporate
calendar and minutes required to support the Board of Directors, preparation of
I.R.S. tax returns for review by the independent auditors and execution by the
Treasurer, preparation of semi-annual and annual financial statements, Monthly
I.R.S./S.E.C. diversification and income testing and weekly prospectus
compliance review, and general oversight and support for the Fund's
financial/treasury functions.
<TABLE>
<CAPTION>
Annual Fee
(Expressed in Basis Points"
Average Assets 1/100 of 1%)
- -------------- ------------
<S> <C>
First $300 Million per Portfolio 3.5
Next $300 Million per portfolio 2.0
Thereafter 0.5
Minimum Annual Fee per Fund $125,000
</TABLE>
For the first year of operations, the fee will be limited to 2 basis
points with no minimum fee.
Fund Administration fees will be calculated by multiplying each Average
Asset break pint by the number of portfolios in the complex to arrive at the
total asset break points. Total assets will be used to calculate the fee by
multiplying total assets by the basis point fees in the table above. The minimum
will be calculated by multiplying the minimum fee by the number of portfolios in
the complex to arrive at a total minimum. The greater of the fee calculated or
the minimum will be accrued daily to each portfolio based on the pro-rata value
of each portfolio in the complex.
II. SPECIAL ARRANGEMENTS:
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, multiple classes of shares, leverage
monitoring, and/or preparation of special reports will be subject to
negotiation. Other special arrangement servicing fees will include, but are not
limited to the following:
- An annual Blue Sky Monitoring fee of $5,000 for each portfolio
of a series and $4,000 for each additional class of shares in
a portfolio. In addition to a per state fee of $50 per
portfolio, per state in which a portfolio is registered will
be charged.
<PAGE> 16
- Preparation of financials other than Annual, Semi-Annual and
Quarterly Board Reporting, $3,0000 per financial report
III. TERM OF THE CONTRACT:
The parties agree that this fee schedule shall remain in effect through
December 31, 1996 and from year to year thereafter until it is revised as a
result of negotiations initiated by either party.
NAVIGATOR SECURITIES LENDING STATE STREET BANK AND TRUST
TRUST COMPANY
By: /s/ M. Bradley Jacobs, Attorney-in-fact By: /s/ K.C. Cuocolo
--------------------------------------- ----------------------------
Title: Vice President Title: Senior Vice President
------------------------------------ -------------------------
Date: April 4, 1996 Date: April 4, 1996
------------------------------------- --------------------------
<PAGE> 17
ADMINISTRATION AGREEMENT
NAVIGATOR SECURITIES LENDING TRUST
EXHIBIT I
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of October ___, 1995 that the
undersigned NAVIGATOR SECURITIES LENDING TRUST with principal offices at Two
International Place, Boston, MA 02110 (individually the "Fund") makes,
constitutes, and appoints STATE STREET BANK AND TRUST COMPANY (the
"Administrator") with principal offices at 225 Franklin Street, Boston,
Massachusetts its lawful attorney-in-fact for it to do as if it were itself
acting, the following:
1. REGISTRATION OF FUND SHARES. The power to register shares of the
Fund in each jurisdiction in which Fund shares are offered or sold and in
connection therewith the power to prepare, execute, and deliver and file any and
all Fund applications, including without limitation, applications to register
shares, consents, including consents to service of process, reports, including
without limitation, all periodic reports, claims for exemption, or other
documents and instruments now or hereafter required or appropriate in the
judgment of the Administrator in connection with the registration of Fund
shares.
2. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney,
individuals holding the titles of Officer, Blue Sky Manager, or Senior Blue Sky
Administrator at the Administrator shall have authority to act on behalf of the
Fund with respect to item 1 above.
The execution of this limited power of attorney shall be deemed coupled
with an interest and shall be revocable only upon receipt by the Administrator
of such termination of authority. Nothing herein shall be construed to
constitute the appointment of the Administrator as or otherwise authorize the
Administrator to act as an officer, director or employee of the Fund.
<PAGE> 18
IN WITNESS WHEREOF, the Fund has caused this Agreement to be executed
in its name and on its behalf by and through its duly authorized officer, as of
the date first written above.
NAVIGATOR SECURITIES LENDING TRUST
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 1
EXHIBIT 19
----------
<PAGE> 2
CERTIFICATE OF ASSISTANT SECRETARY
I, Philip H. Newman, am Assistant Secretary of Navigator Securities
Lending Trust, a Massachusetts business trust (the "Trust"), and in my capacity
as such certify that:
Attached hereto as EXHIBIT A is a true and correct copy of a resolution
adopted by the Board of Trustees of the Trust on March 4, 1996 authorizing
M. Bradley Jacobs to execute the registration statement referred to
therein on behalf of the Trust and such resolutions have not been amended,
modified, annulled or revoked, and are in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of June,
1996.
/s/ Philip H. Newman
---------------------------
Philip H. Newman
Assistant Secretary
1
<PAGE> 3
EXHIBIT A
---------
RESOLVED: That Susan C. Peters, M. Bradley Jacobs and Kathleen C.
-------- Cuocola (the "Designated Persons") be, and each hereby is,
authorized to file with the Securities and Exchange
Commission (the "SEC") a Notification of Registration on
Form N-8A, a Registration Statement on Form N-1A, and all
pre-effective amendments thereto for the purpose of
registering the Trust as an open-end management investment
company under the Investment Company Act of 1940, as amended
(the "1940 Act"), and that the Designated Persons be, and
each hereby is, authorized to prepare, execute and file such
other post-effective amendments thereto and all exhibits and
other documents relating thereto as they may deem necessary
or appropriate in the interest of the Trust.
2
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-21-1996
<PERIOD-END> MAY-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 787,502,280
<INVESTMENTS-AT-VALUE> 787,502,280
<RECEIVABLES> 998,252
<ASSETS-OTHER> 197
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 788,500,729
<PAYABLE-FOR-SECURITIES> 74,951,135
<SENIOR-LONG-TERM-DEBT> 125,070
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 75,076,205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 713,424,524
<SHARES-COMMON-STOCK> 713,424,524
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 713,424,524
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,209,793
<OTHER-INCOME> 0
<EXPENSES-NET> 21,264
<NET-INVESTMENT-INCOME> 1,188,529
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,188,529
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,188,529
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 801,085,555
<NUMBER-OF-SHARES-REDEEMED> 88,849,560
<SHARES-REINVESTED> 1,188,529
<NET-CHANGE-IN-ASSETS> 713,424,524
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,512
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21,264
<AVERAGE-NET-ASSETS> 455,862,927
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .002
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .002
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
